Something that has completely been covered under the news blitz of COVID is the semis escalation from US China. Quick thread on what’s changed and why you should be updating priors hard rn

First and most important is Q1. Almost every semicap company with China as an end market had sequential acceleration from China. Some to ATH of China mix % of sales

This is notable because that was the trough of their COVID quarter, yet accel. China is not playing around.

Second the China catch up is being underestimated. YMTC 128 Layer nand is no joke. hisilicon 7nm finfet is no joke. Yes it’s done in Taiwan but the fab base is being copied right now

If you told me China would have this in 2020 2 years ago I would of lost a lot of money on a bet

Third: there’s an investment bubble that looks like US SaaS frothy in A shares. I do not think it’s as insane as I once thought. How much rev is replicating the fab base in mainland going to be? It’s not secret what CCP wants, and I believe it isn’t just dual sourcing anymore.

Fourth: geopolitical desire is obvious. Our ultimatum that “won” trade war was US semicap. I do not think they will lose that way twice. I have a feeling that the China 2025 goal was kind of laughed at “yeah right” but my base case is that and some right now.

Finally: the hard split is going to happen. The Middle Kingdom will go it’s own way. Why the hell would they ban google / Facebook / amazon, yet let the likes of Intel / NVDA reign supreme? Or AMAT and friends for that matter?

My first level is to be immediately bearish anything that has its incremental growth from China. That’s wrong. China is only ~30-40% of global units and a little lower in rev. Even if you ex-China growth it’s not a terminal value problem

What is a problem is Taiwan’s location.