China has built a parallel semiconductor ecosystem to bypass US sanctions. Beijing has implemented a 50% domestic sourcing requirement for chip manufacturing equipment, restricted Nvidia chip purchases to « special circumstances » since January 2026, and added Chinese AI processors to official government procurement lists starting December 2025. VanEck launched its China Semiconductor ETF, ticker SMHC, in June 2026, targeting 25 leading Chinese semiconductor companies. This localization strategy is fragmenting the global chip supply chain, depriving Nvidia, Qualcomm, and Intel of access to one of their largest markets.
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