Greater China Technology Semiconductors_ Our thoughts on China OSAT restriction

Summary of Conference Call on Greater China Technology Semiconductors Industry Overview - The conference call focuses on the Greater China Technology Semiconductors industry, particularly the impact of new shipment restrictions imposed by TSMC on Chinese IC design firms due to escalating US-China trade tensions [1][2]. Key Points 1. New Shipment Restrictions: TSMC has implemented shipment restrictions effective January 31, 2025, requiring products using 16/14nm and below technologies to be packaged by a US Bureau of Industry and Security (BIS)-certified third-party OSAT provider [1][2]. 2. Impact on Chinese OSATs: None of the 24 approved OSAT providers are Chinese, leading affected IC design houses to prefer changing OSAT suppliers rather than foundry suppliers due to limited foundry capacity in mainland China [2][4]. 3. Revenue Exposure: Companies like Forehope (688363.SS) with over 90% revenue from China customers are expected to be most affected. Other companies like JCET (600584.SS) and Tongfu (002156.SZ) will also face negative impacts but with lower revenue exposure [2][4]. 4. Beneficiaries of Order Shift: OSATs on the approved list, such as ASE (3711.TW) and Amkor (AMKR.O), are likely to benefit from the order shift as affected IC design houses seek new suppliers [2][4]. 5. No Further Impact on TSMC's China Business: Currently, there is no additional impact on TSMC's business in China beyond the previous cloud AI semiconductors [2][4]. Important Considerations - Export Controls: The call includes a note on export controls maintained by the U.S. Department of Commerce, emphasizing that investors must ensure compliance with applicable export control laws when engaging with affected entities [3][4]. - Industry View: The overall industry view is categorized as "In-Line," indicating that the performance of the industry is expected to align with broader market benchmarks [5][4]. Additional Insights - Analyst Ratings: The report includes various stock ratings for companies within the semiconductor sector, indicating a mix of "Overweight," "Equal-weight," and "Underweight" ratings for different firms [54][55]. - Potential Conflicts of Interest: Morgan Stanley acknowledges potential conflicts of interest due to its business relationships with companies covered in the research [5][4]. This summary encapsulates the critical insights and implications for the Greater China Technology Semiconductors industry as discussed in the conference call.