Are US Sanctions On China Working? China Tech ETFs Paint A Picture

U.S. advanced semiconductor technology embargo on China and ramp-up of the semiconductor technology base have affected China.

Shares in top Chinese chipmakers shed $7.7 billion in market value on October 10, as new U.S. export controls kicked in, restricting the sale of semiconductors made with U.S. technology.

The controls also barred U.S. citizens or entities from working with Chinese chipmakers and limited the export of manufacturing tools.

Also Read: US Chips Act Mandates Contenders To Share Excess Profits With Country, Refrain From Buybacks And China

The U.S.'s landmark $52 billion federal program to boost domestic chipmaking capabilities bars companies procuring federal funding from materially expanding production of chips more advanced than 28 nm in China for ten years. Companies vying for funding cannot increase their production of advanced chips in China.

Leading U.S. tech ETFs SPDR Select Sector Fund - Technology XLK, VanEck Semiconductor ETF SMH, and iShares Semiconductor ETF SOXX have gained between 17.6% - 25.5% year-to-date.

SMH and SOXX with exposure to Nvidia Corp NVDA, Taiwan Semiconductor Manufacturing Company Ltd TSM, Advanced Micro Devices, Inc AMD, ASML Holding N.V. ASML, Texas Instruments Inc TXN, Intel Corp INTC and other chipmakers led the gains.

XLK has significant exposure to Microsoft Corp MSFT, Apple Inc AAPL, followed by chipmakers Nvidia and more.

Contrastingly leading Chinese tech ETF gains trailed U.S. peers. iShares China Large-Cap ETF FXI, KraneShares Trust KraneShares CSI China Internet ETF KWEB, and iShares MSCI China ETF MCHI gained between 0.4%- 2.7% YTD.

The Chinese ETFs have significant exposure to Tencent Holding Ltd TCEHY, Alibaba Group Holding Limited BABA, Baidu, Inc BIDU, JD.Com, Inc JD, and more.

Other factors, such as China's crackdown on tech, also impacted major players like Alibaba, JD, and Baidu.

Photo by Tatiana Popova and rawf8 via Shuttterstock