Taiwan plans to curb AI server and chip exports to China as part of a US trade deal and make shipping restricted AI hardware to China a criminal offense (Bloomberg)

Chinese chip and technology companies have reported up to six-fold increase in unaudited third-quarter profits, driven by strong demand for domestically produced processors and artificial intelligence infrastructure. This aligns with China's push for self-reliance in critical technologies. Yuanjie Semiconductor Technology, a Shanghai-listed firm, anticipates a profit between 403 million and 453 million yuan, a 579% to 660% increase from the previous year.

Growth in data-center demand is helping maintain high margins for the company. MetaX, a graphics processing unit designer, turned a profit in the period due to increased orders, projecting a net profit between 587 million yuan and 717 million yuan, marking a turnaround from a year-earlier loss. Hygon Information, which provides processors for general computing and AI workloads, projects revenue growth of 50% to 64% in the first nine months, citing rising demand for high-end chips as customers opt for domestic alternatives over foreign suppliers.

Storage giant Shenzhen Longsys Electronics expects its net profit to reach 14 billion to 14.9 billion yuan, roughly 20 times the figure from the previous year. The company noted that price increases for DRAM and NAND flash storage have slowed, limiting profit growth. Optical module supplier Accelink Technologies forecast a nine-month net profit growth of 65% to 82%, driven by global AI capital spending and Chinese cloud providers' continued investment in data centers.

Silicon wafer supplier Xian Eswin Material Technology reported full capacity production lines in the first nine months, with sales volumes up about 43% to 8.3 million wafers. Despite gains from investments in its customers' initial public offerings, the company still expects a loss after excluding non-recurring items. China's AI buildout and efforts to replace imported processors are generating more business for local chip designers.

TrendForce projects that Chinese-designed chips will account for almost 90% of the country's high-end AI processor market this year. The growth in chip production is also benefiting materials suppliers. Hubei Feilihua Quartz Glass forecast a nine-month net profit growth of 35% to 56%, citing stronger semiconductor demand and opportunities to replace imported products.

Bernstein warned that supply catching up or customers slowing purchases could cool the boom even without weaker AI demand, as quartz components used in chipmaking equipment are already well-localized in China.