China’s semiconductor ambitions have rapidly shifted from aspiration to policy-driven reality. Confronted with export controls from the United States and other Western nations, Beijing is pursuing a bold industrial strategy aimed at reducing reliance on foreign technology across both hardware and software layers of the tech stack. While much attention has focused on hardware,including chips and manufacturing equipment,the so-called “Xinchuang” initiative mandates the replacement of foreign technology (software and hardware) in government and state-owned sector procurement. This environment is reshaping the competitive landscape and creating fresh opportunities for domestic semiconductor stocks.
Policy Backdrop: From Export Controls to Indigenous Technology Plans
Over the past several years, Chinese policymakers have amplified efforts to localize critical technology. This includes adding domestic AI chips to official procurement lists and prioritizing them for use in governmental agencies and state entities,a move that deliberately excludes foreign firms such as Nvidia and AMD.
At the same time, new mandates require chip manufacturers to achieve minimum thresholds of domestic equipment content (e.g., a 50% domestic equipment requirement), accelerating investment in local suppliers and reducing dependency on foreign manufacturing tools.
These shifts are rooted not only in geopolitics but also in the industrial rationale to achieve technology self-reliance—a term Beijing uses to describe the ability to innovate and produce critical components without external bottlenecks.
Stocks Positioned to Benefit from the Policy Push
Several Chinese semiconductor companies are emerging as leaders in this strategic transition. Investors tracking the replace foreign technology trend have increasingly focused on firms involved in chip design, manufacturing, EDA tools, and equipment supply.
1. Cambricon Technologies (AI Chip Design)
Cambricon has become one of the best-known domestic AI chip specialists. With strong policy support and rapidly growing market exposure, its AI processors are increasingly adopted in cloud and edge computing applications. The stock has previously delivered fast growth driven by investor optimism around self-reliant AI compute solutions.
2. SMIC (Semiconductor Manufacturing)
Semiconductor Manufacturing International Corporation remains China’s largest foundry, anchoring many domestic chip production efforts. While it currently lags international leaders in cutting-edge nodes, its role in translating government targets into production capacity makes it a cornerstone stock in China’s semiconductor strategy.
3. Hua Hong Semiconductor (Foundry Sector Growth)
Another key foundry, Hua Hong has shown stock strength tied to the broader domestic substitution trend. As demand rises for China-developed chips, founded deep within its borders, Hua Hong benefits from enlarging production footprints and investor confidence.
4. Naura Technology (Equipment and Tools)
Naura is among the first Chinese equipment makers gaining global scale. Fueled by strong patent growth and domestic mandates for localized manufacturing tools, Naura is positioned to take share from foreign suppliers in areas such as etching and wafer processing equipment.
5. Empyrean Technology (EDA Software)
EDA (Electronic Design Automation) software is a critical layer that has traditionally been dominated by U.S. firms. Domestic EDA companies like Empyrean are increasingly important as China pursues full stack independence—including software used in chip design,forwarding another dimension of the replace foreign agenda.
6. Hygon Information Technology (CPU and Processor Solutions)
Hygon’s focus on local CPU and deep-learning processor designs positions it as a play on China’s broader effort to localize core compute architectures,especially in systems that may replace foreign-supplied central processors.
7. Silan Microelectronics (Integrated Devices)
As a larger integrated device manufacturer, Silan participates across multiple aspects of the semiconductor value chain, from design to production, aligning with the broader push for domestic capability building.
Market Reaction and Risks
Chinese semiconductor stocks have seen heightened interest amid domestic substitution trends. Firms like Cambricon and Hygon exhibited notable share price strength as investors priced in future growth driven by local procurement and geopolitical divergence from Western technology ecosystems.
However, this transition is not without risks. Domestic technologies still trail global leaders in many advanced metrics, and companies may face challenges scaling production, matching performance metrics, or integrating with global supply chains. Additionally, foreign competitors may find alternate pathways to participate or adapt, potentially influencing long-term outcomes.
Conclusion: Opportunity Amid Strategic Shift
China’s push toward semiconductor independence,amplified by “replace foreign software/hardware” mandates—has laid a foundation for domestic champions to grow. Stocks across design (Cambricon), manufacturing (SMIC, Hua Hong), tools (Naura), and supporting software (Empyrean) are increasingly seen as direct beneficiaries of this initiative. While execution risk and technological gaps persist, the policy thrust and capital flows suggest a multi-year structural investment theme that global investors are watching closely.