U.S.-China Trade Tensions Fuel Semiconductor Reshoring: Spotting Undervalued Winners in the CHIPS Act Surge

The escalating U.S.-China trade war has turned the semiconductor industry into a geopolitical battleground, with supply chain reshoring and government subsidies driving a historic shift in manufacturing footprints. Amid this turmoil, investors seeking undervalued opportunities should focus on companies positioned to capitalize on the CHIPS Act's $52.7 billion stimulus and the broader push to insulate critical tech supply chains from Chinese influence. Here's how to identify the hidden winners.

The Geopolitical Catalyst: Trade Tensions and the CHIPS Act

The U.S. semiconductor industry, once a global leader, now faces a stark reality: China controls over 60% of advanced packaging and 30% of mature-node chip production. In response, the CHIPS Act has become the linchpin of a strategy to rebalance supply chains. By offering grants, tax credits, and R&D funding, it incentivizes companies to build domestic capacity in areas like advanced packaging, specialty chips, and critical materials—sectors where China's influence is strongest.

The Trump administration's renegotiation of subsidy terms has added volatility, but it also underscores the strategic priority of semiconductor self-sufficiency. For investors, the key is to look beyond headline-grabbing giants like TSMC and Intel to smaller players whose valuations have yet to reflect their CHIPS Act-fueled growth trajectories.

Undervalued Plays in the Reshoring Boom

1. Polar Semiconductor ($PSEM) – The Undiscovered Foundry Star

Polar Semiconductor received $123 million in CHIPS Act grants to double U.S. production of sensor and power chips. These are critical for automotive, IoT, and defense applications—markets where China's dominance is a national security concern. With a market cap of just $1.2 billion and a P/E ratio of 12, Polar trades at a fraction of peers like Texas Instruments (TXN), yet its $175 million in equity financing and 2025 production ramp-up suggest strong upside.

2. Entegris (EGLE) – The Unsung Materials Champion

Entegris' $77 million CHIPS grant funds a Colorado facility for liquid filtration systems and front-opening unified pods (FOUPs), which are essential for chip fabrication. Its $6 billion market cap and 15% ROE are undervalued relative to its role in enabling fabs like TSMC's Arizona plants.

3. Hemlock Semiconductor (HSC) – Polysilicon's Quiet Giant

Hemlock's $325 million grant funds a Michigan polysilicon plant, a bottleneck material for leading-edge chips. With global polysilicon shortages persisting and U.S. reliance on Chinese imports at 40%, Hemlock's 2025 startup could deliver 20% EBITDA margins. Its private equity-backed structure offers a rare chance to invest in a critical supply chain link before it goes public.

4. Absolics (ABSL) – Advanced Packaging's Hidden Gem

Absolics, a SKC affiliate, received $75 million to build glass substrates for advanced packaging—a field where U.S. capacity lags behind Taiwan and South Korea. Its 120,000-square-foot Georgia facility targets 2027 production, with 30% of revenue already committed to TSMC and Samsung. A $500 million valuation with 30% annual growth potential makes it a compelling pick.

Risks and Strategic Considerations

While these companies are well-positioned, risks remain. Trump's push to slash CHIPS Act funding and renegotiate terms could delay milestone-linked disbursements. Investors should prioritize firms with diversified revenue streams (e.g., Entegris' non-CHIPS contracts) and strong private partnerships. Additionally, monitor geopolitical developments: any easing of U.S.-China tensions could compress valuations, but the structural shift toward reshoring is irreversible.

Investment Strategy: Play the CHIPS Act Gradient

1. Focus on niche players with CHIPS grants tied to undersupplied sectors (advanced packaging, critical materials).
2. Avoid overhyped names like TSMC or Intel, which already reflect subsidy benefits in their valuations.
3. Target firms with 2025–2026 production ramps, as these will see revenue inflection points.
4. Use ETFs like SMH or SOXX for broad exposure, but pair with concentrated bets on undervalued names.

The CHIPS Act's $52.7 billion is a generational opportunity to profit from reshoring—but the real rewards lie in the companies flying under the radar. Those willing to dig into subsidy allocations and supply chain dynamics will find pockets of undervalued growth that outpace geopolitical noise.