Since the U.S.-China "tech war" widens, investors are betting on China's attempts to substitute U.S. technology
Since the U.S.-China"tech war" widens, investors are betting on China's attempts to substitute U.S. technology with indigenous applications to operate networks in the state sector.
In recent months, both local authorities and state companies such as China Telecom have announced plans and procurements aimed at boosting a home-grown tech ecosystem to animate equipment from the likes of Intel, Microsoft, Oracle and IBM.
An index tracking Chinese IT stocks .CSIINT has soared nearly 30 percent this season, doubling blue-chip gains .CSI300.
"We're seeing more U.S. actions against China, and also the future tends to be'one world, two systems'," said Wu Kan, portfolio director at Soochow Securities Co, who has spent in local tech leaders including China National Software & Service Co Ltd (600536. SS).
"Any segment that confronts decoupling risks represents big investment opportunities."
Some market watchers warn valuations of China technology stocks are becoming frothy at approximately 60 times trailing earnings, noting Chinese firms may take years to catch-up to established international players. But Wu said price levels are justified by expansion potential and lead government financing.
The Trump government has recently strengthened restrictions on China's Huawei Technologies and sanctioned China-owned programs TikTok and WeChat.
Beneath U.S. pressure, Chinese vendors are poised to acquire local market share, said Jie Lu, Robeco's China research head.
Dongxing Securities predicted that a retooling would produce a 1 trillion yuan ($144.46 billion) chance over the next three years for local vendors.
KUNPENG PUSH
Local authorities are rushing to form industry federations to promote the use of Huawei's Kunpeng processing technologies.
Last week, China Unicom's Wuchang subsidiary struck a partnership with Huanghe Technology, which makes servers and PCs utilizing Kunpeng technologies. In May, IT distributer Digital China (000034. SZ) stated it had been constructing plants to make PCs and servers using Kunpeng CPUs.
Also in May, China Telecom said it would secure around 56,314 servers in 2020, one-fifth of these utilizing Kunpeng and Hygon Dhyana processors, which rival U.S. brands Intel and AMD in a move seen as a gesture of Beijing's localisation drive.
"China must encourage domestic replacement to prevent being strangled, even as its present technology lags by much," Zhang Chi, chairman of Xin Ding Capital stated during a investor roadshow for Haigon Information Technology, manufacturer of Hygon Dhyana chips.
Some 95% of Chinese servers utilize CPUs from Intel.
It could be disaster, Zhang stated,"if a single day, Trump prohibits Intel from selling CPUs into China."
Zhang anticipates Chinese government agencies to replace all computers using U.S. chips at the subsequent five years, echoing views of several analysts.
National Software & Service, which makes operating systems which compete with Windows and middleware that intends to rival IBM and Oracle, anticipates revenue this year to leap 70% to 10 billion yuan.
Beijing Kingsoft Office Software this week posted a 143% jump in first-half gain and stated China's need for data security is boosting sales. SS) also sees authorities and fund customers as new expansion engines thanks to replacement requirement, investor relations official Guo Xing said.
However, Brian Bandsma, New York-based portfolio manager at Vontobel Asset Management, stated the opportunities in replacement requirement could be restricted, given less aggressive local offerings and what may be longer-than-expected adoption prices.
"Firms like Microsoft have been in existence for decades and have a very complex bit of software that's being heavily used by numerous industries. There's a reason why Microsoft is in the place it is in," explained Bandsma.
"There's probably too much optimism baked into valuations in terms of what these local organizations will get out of China's concentrate on domestic providers.
In recent months, both local authorities and state companies such as China Telecom have announced plans and procurements aimed at boosting a home-grown tech ecosystem to animate equipment from the likes of Intel, Microsoft, Oracle and IBM.
An index tracking Chinese IT stocks .CSIINT has soared nearly 30 percent this season, doubling blue-chip gains .CSI300.
"We're seeing more U.S. actions against China, and also the future tends to be'one world, two systems'," said Wu Kan, portfolio director at Soochow Securities Co, who has spent in local tech leaders including China National Software & Service Co Ltd (600536. SS).
"Any segment that confronts decoupling risks represents big investment opportunities."
Some market watchers warn valuations of China technology stocks are becoming frothy at approximately 60 times trailing earnings, noting Chinese firms may take years to catch-up to established international players. But Wu said price levels are justified by expansion potential and lead government financing.
The Trump government has recently strengthened restrictions on China's Huawei Technologies and sanctioned China-owned programs TikTok and WeChat.
Beneath U.S. pressure, Chinese vendors are poised to acquire local market share, said Jie Lu, Robeco's China research head.
Dongxing Securities predicted that a retooling would produce a 1 trillion yuan ($144.46 billion) chance over the next three years for local vendors.
KUNPENG PUSH
Local authorities are rushing to form industry federations to promote the use of Huawei's Kunpeng processing technologies.
Last week, China Unicom's Wuchang subsidiary struck a partnership with Huanghe Technology, which makes servers and PCs utilizing Kunpeng technologies. In May, IT distributer Digital China (000034. SZ) stated it had been constructing plants to make PCs and servers using Kunpeng CPUs.
Also in May, China Telecom said it would secure around 56,314 servers in 2020, one-fifth of these utilizing Kunpeng and Hygon Dhyana processors, which rival U.S. brands Intel and AMD in a move seen as a gesture of Beijing's localisation drive.
"China must encourage domestic replacement to prevent being strangled, even as its present technology lags by much," Zhang Chi, chairman of Xin Ding Capital stated during a investor roadshow for Haigon Information Technology, manufacturer of Hygon Dhyana chips.
Some 95% of Chinese servers utilize CPUs from Intel.
It could be disaster, Zhang stated,"if a single day, Trump prohibits Intel from selling CPUs into China."
Zhang anticipates Chinese government agencies to replace all computers using U.S. chips at the subsequent five years, echoing views of several analysts.
National Software & Service, which makes operating systems which compete with Windows and middleware that intends to rival IBM and Oracle, anticipates revenue this year to leap 70% to 10 billion yuan.
Beijing Kingsoft Office Software this week posted a 143% jump in first-half gain and stated China's need for data security is boosting sales. SS) also sees authorities and fund customers as new expansion engines thanks to replacement requirement, investor relations official Guo Xing said.
However, Brian Bandsma, New York-based portfolio manager at Vontobel Asset Management, stated the opportunities in replacement requirement could be restricted, given less aggressive local offerings and what may be longer-than-expected adoption prices.
"Firms like Microsoft have been in existence for decades and have a very complex bit of software that's being heavily used by numerous industries. There's a reason why Microsoft is in the place it is in," explained Bandsma.
"There's probably too much optimism baked into valuations in terms of what these local organizations will get out of China's concentrate on domestic providers.