Hong Kong’s technology shares slid Tuesday, with the Hang Seng Tech Index falling 1 percent as China’s two largest chipmakers tumbled on company-specific news and broader sector concerns. Hua Hong Semiconductor Ltd. (1347.HK) dropped 5.33 percent, while Semiconductor Manufacturing International Corp. (0981.HK) lost nearly 5 percent.
The sell-off reflects persistent investor concerns about the Chinese semiconductor industry, even as domestic demand for artificial intelligence chips grows. Analysts have highlighted rising depreciation costs from aggressive capacity expansion and persistent yield issues as key headwinds for the sector's profitability.
The weakness in tech shares came as other regional markets showed mixed performance and the yuan weakened. The Shanghai Composite Index traded down 0.4 percent, while the offshore yuan (USD/CNH) edged 0.1 percent higher to 7.25. The yield on the U.S. 10-year Treasury note held steady at 4.47 percent.
For investors, the declines underscore the high stakes for China's push toward semiconductor self-sufficiency. While the government is pouring capital into the industry and AI models from firms like DeepSeek promise a surge in domestic orders, chipmakers face a difficult path to profitability, balancing huge capital outlays with global competition and supply chain pressures, particularly in memory chips. SMIC's quarterly results on Thursday will provide the next major data point on the sector's health.
Hua Hong Semiconductor’s stock fell after the company announced a change in its company secretary and authorised representative, effective May 12. Sui Har Lee resigned from the posts, and the company appointed Ka Ming Ho, a veteran corporate lawyer with two decades of experience in M&A and compliance at international and Chinese law firms.
While the board stated there was no disagreement with Lee and thanked her for her service, unexpected high-level governance changes can create uncertainty for investors. The appointment of a seasoned legal expert may be a move to strengthen the company's governance and interface with the Hong Kong market amid a challenging period.
SMIC’s shares declined ahead of its first-quarter earnings report due Thursday. According to a Visible Alpha poll of 11 analysts, the chipmaker is expected to report a 19 percent rise in net profit to $223.6 million on a 12 percent increase in revenue to $2.51 billion.
Investors will be watching for management’s commentary on several key issues that weighed on the stock in the first quarter, including rising depreciation costs from its capacity expansion and challenges in improving yields on more advanced nodes. Co-chief executive Zhao Haijun recently warned that the industry was "a bit panicked" about a memory chip shortage driven by the AI boom, which could impact orders from some customers. The launch of new AI models by Chinese firms, however, is seen as a potential tailwind, firming beliefs that local AI firms will increasingly turn to domestic chip designers and foundries like SMIC.
This article is for informational purposes only and does not constitute investment advice.
