Semiconductors are at the heart of an evolving ‘technology cold war’ as the US and China vie for technological supremacy in the sector.
We believe the strong structural thematic tailwinds that underpin the sector will continue to offer compelling investment opportunities over the medium term. Both China and the US will continue to pour capital into the sector to protect and build their own interests: China to achieve self-sufficiency, and the US to control the intellectual property (IP) and create a global supply chain with less geopolitical exposure.
America’s ‘trump card’ is that it controls most of the IP in the semiconductor industry and has legal frameworks to control access to it internationally, while China has clear current leadership in 5G technology. However, in our view, investors should remain cognisant of the geopolitical risks, chief among them the US moving forward with broader restrictions on China’s access to technology, and the worst-case scenario of conflict between the superpowers over Taiwan. In conclusion, despite these risks, we believe the systemically important prize on offer to both countries, and the exponential growth we anticipate over the next few years, should ensure that the semiconductor sector remains a compelling investment opportunity for some time yet.
Paul Markham, portfolio manager, equity opportunities team, Newton Investment Management.
Doc ID: 763129