Follow the money, an unconventional view on the chip battle

We now know that chips are viewed as strategic industry and assets by big countries. $Microsoft (MSFT.US)$'s ChatGPT had shown us that the future is in computing and AI, and computing and AI requires really powerful chips to be super efficient and effective. Thus, those who control the chips will be able to have competitive advantage to build the economy of the future.

According to McKinsey, chip demand had been soaring with annual revenue increased by 9 percent in 2020 and by 23 percent in 2021. And by 2030, this will become a trillion dollar industry. A Trillion Dollar, USD$1,000,000,000,000. For comparison, total oil and gas as of 2023 is a USD$7.3trillion dollar (due to higher prices, in 2020 total oil and gas is only USD$4.6trillion). This is excluding all the technology companies that is built on top of semiconductor which would be worth a lot more than a trillion dollars. As U.S. Secretary of Commerce Gina Raimondo said "without manufacturing strength in the U.S., and the innovation that flows from it, we are at a clear disadvantage in the race to invent and commercialize future generations of technology."

On top of trying to regain control of the strategic semiconductor industry, the West had also attacked China with an ever growing list of export controls to cripple China's ability to advance in this space. "This will set the Chinese back years, said Jim Lewis, a technology and cybersecurity expert at the Center for Strategic and International Studies (CSIS), a Washington D.C.-based think tank, who said the policies harken back to the tough regulations of the height of the Cold War."

Follow the money, an unconventional view on the chip battle

So here comes my unconventional view
When it comes to investing in chip stocks the most common names are $NVIDIA (NVDA.US)$, $Advanced Micro Devices (AMD.US)$, $Taiwan Semiconductor (TSM.US)$ and $ASML Holding (ASML.US)$. However, these companies will have their revenue and profit cut significantly as the chips wars continues. This is because China is a significant buyer of chips. Their revenue and profit may grow because the industry is growing, but they could have grown a lot more without the export ban.

Since we know that both China and the West see the semiconductor industry as a strategic industry, we can be sure that they will be pumping tons of cash into the industry. So $SMIC (00981.HK)$ and Chinese semiconductor stocks in $SMIC Concept (LIST0709.SH)$ are kindda like the underdog. I'm sure China will be pumping a lot of money to make sure they can build their own semiconductor industry, so that would benefit the underdogs. Furthermore, there are signs that the Chinese companies are advancing in the semiconductor space with Huawei filing a number of patents on building advance semiconductors, If underdogs succeed, they will see their revenue and profit skyrocket too. A much riskier but potentially much more rewarding investment.

Just some thoughts on alternatives investment by following the money, please do your own due diligence

source: Strategies to deal with the semiconductor shortage | McKinsey, The semiconductor decade: A trillion-dollar industry | McKinsey, Remarks by U.S. Secretary of Commerce Gina Raimondo: The CHIPS Act and a Long-term Vision for America's Technological Leadership, U.S. aims to hobble China's chip industry with sweeping new export rules, Chinese telecoms giant Huawei pushes semiconductor packaging innovation to ease disruptions caused by US chip sanctions | South China Morning Post

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