Primary Information Services: September 2020

The US government is seeking to escalate its tech war against China by considering adding China's leading chipmaker SMIC to a trade blacklist, threatening to further disrupt a massive $300 billion-worth annual chip trade between China and other countries, including the US, whose companies sold about $70 billion worth of chips to China in 2019 alone.

UMC to be a major beneficiary from the US’ potential ban
UMC ranked as the world’s fourth-biggest foundry last quarter, with revenue of US$1.44 billion, while SMIC had US$941 million in revenue, according to the statistics compiled by market researcher TrendForce Corp
Both companies offer 14 nanometers as their most advanced process technology, but SMIC generates a large part of its revenue from less advanced chips
Novatek Microelectronics Corp , which supplies chips that control flat-panel displays, would be another beneficiary and could see a rebound in its share price, as the US ban would make it difficult for SMIC to tap into the driver IC market
UMC, Vanguard International Semiconductor Corp and GlobalFoundries Inc are likely to receive orders transferred from SMIC if the Trump administration further tightened its grip on SMIC and other Chinese semiconductor companies
Since UMC and Vanguard are running their 8-inch fabs at almost full capacity, they could see an uptick in chip prices amid supply constraints, while UMC and TSMC could see an increase in demand for less advanced chips made by their 12-inch fabs,