U.S.-China Tech Decoupling Fuels Semiconductor Sector Growth: Navigating Opportunities in a Divided Landscape

The escalating U.S.-China trade tensions and technology decoupling have reshaped the global semiconductor industry, creating a bifurcated market with distinct opportunities for investors. While the U.S. government's CHIPS Act and export controls aim to secure domestic semiconductor leadership, China's self-reliance drive has opened niche markets for firms with strategic advantages. This article explores how investors can capitalize on these structural shifts by targeting companies with advanced R&D, diversified supply chains, and government-backed projects.

The U.S. Playbook: CHIPS Act Funding as a Catalyst

The CHIPS Act, which has allocated over $52 billion in grants and loans to U.S. semiconductor firms, is a cornerstone of the Biden administration's strategy to rebuild domestic chip production. By June 2025, the Department of Commerce had disbursed $32.5 billion to 32 companies, including Intel, TSMC, and Samsung, for projects tied to production milestones.

For instance, Intel secured $7.86 billion for its Arizona, Ohio, and New Mexico operations, while TSMC received $6.6 billion to build three leading-edge fabs in Arizona. These projects aim to boost U.S. global market share to 20% by 2030. The Act's milestone-driven funding model ensures capital flows only to firms meeting strict production and job-creation targets, reducing speculative risks for investors.

Intel's stock rebounded by 35% in 2024–2025 as it met CHIPS Act milestones, signaling investor confidence in its U.S. manufacturing push.

China's Self-Reliance: Niche Markets and Risks

China's semiconductor ambitions, hampered by U.S. export curbs on advanced chips and equipment, have led to massive overinvestment in domestic capacity. While this may lead to overcapacity in mature-node chips, it also creates opportunities for firms with niche technologies or supply chain flexibility.

U.S. firms like Applied Materials and ASML—critical suppliers of semiconductor manufacturing equipment—are indirectly benefiting from China's push for self-reliance. Despite export controls, some technologies not covered by sanctions may still find markets in China, rewarding companies with agile supply chains.

ASML's stock rose 40% in 2024–2025, driven by demand for its lithography tools from U.S. and non-U.S. manufacturers.

Key Investment Themes

1. Advanced R&D and Government Contracts
   Companies with robust R&D pipelines and CHIPS Act funding are well-positioned. TSMC, for example, is advancing to 2nm technology in Arizona, while Micron is expanding memory chip capacity in New York and Idaho.

2. Diversified Supply Chains
   Firms with global production footprints and flexibility to shift manufacturing avoid over-reliance on any single region. GlobalFoundries (which received $1.5 billion under the CHIPS Act) exemplifies this, with fabs in New York and Vermont.

3. Niche Technology Leaders
   Companies specializing in areas like advanced packaging (e.g., Amkor Technology) or foundry services (e.g., Samsung's Texas fabs) can capture market share in both U.S. and non-U.S. markets.

Risks and Considerations

• Political Volatility: The incoming Trump administration may alter CHIPS Act priorities, though bipartisan support for semiconductor security likely limits drastic cuts.
• Overcapacity Concerns: China's self-reliance push risks oversupply in mature-node chips, potentially depressing prices.
• Financial Strain: High capital expenditures (e.g., Intel's $1.6B 2024 loss) require firms to balance debt with funding milestones.

Investment Recommendations

• Buy: TSMC (TPE:2330) for its leading-edge technology and U.S. expansion.
• Hold: Intel (INTC) for its CHIPS Act-backed projects, though monitor its financial discipline.
• Watch: ASML (ASML) for its critical role in enabling U.S. and allied manufacturing.

Conclusion

The U.S.-China tech divide has created a two-track semiconductor market: one dominated by U.S. government-backed innovation, and another shaped by China's self-reliance ambitions. Investors should prioritize firms with CHIPS Act funding, advanced R&D, and supply chain agility. While risks exist, the structural tailwinds of geopolitical realignment and sustained demand for chips in AI, automotive, and defense make this sector a compelling long-term play.

Stay diversified, focus on fundamentals, and let the chips fall where they may.