Flying Against the Wind: Navigating US-China Tech Decoupling in Aviation and Semiconductors

The U.S. suspension of jet engine exports to China has ignited a new chapter in the tech decoupling saga, reshaping global supply chains and unlocking asymmetric investment opportunities. For investors, the stakes are clear: the battle over aviation and semiconductor dominance will define the next decade of economic and geopolitical power. Here's how to position for the turbulence—and the tailwinds.

The C919 Crossroads: When Geopolitics Grounds Innovation

COMAC's C919, China's first narrow-body passenger jet, has become a geopolitical pawn. The May 2025 suspension of U.S. engine exports—specifically targeting the LEAP engine jointly produced by GE (NYSE:GE) and Safran (EPA:SAF)—threatens to stall its global ambitions. While the C919 is already flying domestically, its reliance on foreign technology has always been its Achilles' heel.

Short-Term Risks for U.S. Firms:
The ban directly impacts GE's aviation division, which derives 15% of its revenue from China. With over 800 LEAP engines ordered for the C919, halted deliveries could erase $1.5 billion in potential revenue. Investors should monitor:

The Pivot to Europe:
COMAC is accelerating its pivot to European suppliers like Safran, Thales (EPA:HO), and Liebherr to replace U.S. components. This shift isn't just about engines—it extends to avionics, hydraulics, and certification via the European Union Aviation Safety Agency (EASA). European firms are now gatekeepers to the C919's global market entry, a role investors should capitalize on:

Semiconductors: The Invisible Engine of the Tech War

The U.S. semiconductor export controls, particularly targeting EDA software and advanced chips, are forcing China into a costly, but strategic, sprint toward self-reliance. COMAC's C919, for instance, relies on semiconductors for avionics, flight systems, and navigation.

The Semiconductor Domino Effect:
- U.S. Firms: Companies like Applied Materials (NASDAQ:AMAT) and Lam Research (NASDAQ:LRCX), which supply critical semiconductor tools, face declining sales to Chinese manufacturers.
- Chinese Counterplay: State-backed firms like Semiconductor Manufacturing International Corporation (SMIC, HKEX:981) are ramping up 28nm chip production, while startups like DeepSeek leverage AI to leapfrog legacy tech.

Investors should track:

The Long Game: Betting on Tech Sovereignty

The U.S.-China decoupling isn't just about sanctions—it's a structural shift toward tech sovereignty. Here's where investors should look for durable gains:

1. Defense and Indigenous Tech:
2. U.S. Play: Companies like Raytheon Technologies (NYSE:RTX) and Lockheed Martin (NYSE:LMT) are beneficiaries of a renewed focus on domestic defense tech.

3. China Play: State-owned enterprises like AVIC and Casic, behind the CJ-1000A engine and AI-driven systems, will dominate domestic contracts.

4. European Bridge Builders:
   European firms like Safran and Thales, positioned as intermediaries between U.S. and Chinese supply chains, could see 20-30% revenue growth from Asian partnerships.

5. AI and R&D Leaders:
   Companies like NVIDIA (NASDAQ:NVDA) and Alphabet (NASDAQ:GOOGL) dominate AI tools critical for semiconductor design, while Chinese firms like Huawei's HiSilicon push for parity.

Act Now: The Decoupling Discount

The market is pricing in uncertainty, but the winners are already emerging. Short-term volatility in U.S. tech and aerospace stocks creates entry points for long-term plays:

• Buy: European aerospace suppliers (e.g., Safran, Liebherr) and U.S. defense giants (RTX, LMT).
• Sell: U.S. semiconductor toolmakers exposed to China (AMAT, LRCX) unless they pivot to non-Chinese markets.
• Hold and Wait: COMAC's C919—while delayed—remains a strategic asset. Investors should wait for EASA certification milestones before entering.

Final Take: The Sky's the Limit—for Someone

The U.S.-China tech war is a zero-sum game in the short term, but it's a multiplicative opportunity for investors who bet on resilience. The companies and sectors that master the “decoupling dividend”—whether through diversification, R&D, or geopolitical agility—will dominate the next era of global tech.

The runway is clear. Choose your altitude wisely.