US export curbs have reshaped China’s tech scene around ‘chokepoints’: report

Chinese technology companies seeking public listings are increasingly concentrated in areas where Beijing is trying to break its reliance on foreign technology, as years of US export controls reshape the country’s pipeline of stock market hopefuls. About 20 per cent of companies that have launched initial public offerings on Shanghai’s Star Market so far this year are engaged in tackling key technological “chokepoints” facing China, compared with just 8.1 per cent in 2022, according to a Morgan Stanley analysis of 229 IPOs between 2022 and mid-July 2026. About 60 per cent of firms in 2026 contributed to China’s push for supply chain self-sufficiency, up from 41 per cent four years ago, said the report published on Friday. China’s critical tech bottlenecks have also narrowed since 2022, from a broad mix of strategic goods to a focus on the semiconductor supply chain, according to the investment bank. Driven by expanding foreign trade curbs, the pressure points have moved upstream to raw materials, complex machinery, specialised parts and core manufacturing tools. Of the 21 companies Morgan Stanley identified as addressing chokepoints this year, 19 are in the semiconductor supply chain. There is a particular focus on chokepoints in electronics, with 15 of the firms coming from that sector. “As the chokepoints expanded in the past three to four years, more domestic companies became dedicated in those areas and by 2026 some of them had grown to a stage ready to tap into the capital market to further scale up,” the bank’s analysts wrote. Washington has imposed sweeping controls on China’s semiconductor sector since 2022, restricting the country’s access to advanced computing chips and the equipment needed to manufacture cutting-edge semiconductors. A major escalation in December 2024 restricted various chipmaking equipment and categories of semiconductor-development software. The administration of US President Joe Biden further curbed access to high-bandwidth memory used for artificial intelligence and blacklisted Chinese organisations including semiconductor factories, equipment manufacturers, and investment firms linked to China’s military ambitions. While US President Donald Trump has since eased some restrictions on advanced AI processors, including allowing Nvidia’s H200 chips to be sold to China under certain conditions, the broader pressure on the supply chain remains. Soaring R&D costs The report also found that China’s technological push was becoming increasingly expensive – and risky. Companies in the 2026 IPO cohort spent twice as much on research and development on average compared with their 2022 counterparts, while R&D spending per employee also doubled, according to Morgan Stanley. Annual pre-IPO capital expenditure for companies in 2026 stood at 716 million yuan (US$107 million), more than four times the 174 million yuan average recorded for the 2022 cohort. Morgan Stanley analysts said the heavier spending reflected a “genuine need” for capital, as companies working deeper in strategic supply chains required significant investment not only in research but also to scale their technologies into commercial production. For example, the blockbuster IPO of chipmaker ChangXin Memory Technologies in July showed how capital raised through public markets could help expand its dynamic random-access memory production capacity. The expansion could benefit Chinese chipmaking-equipment suppliers seeking to replace US vendors across more stages of production, although there was still a lack of domestic alternatives in deep-ultraviolet lithography equipment, the analysts said. However, the new generation of listings comes with greater risks for investors. Only 46 per cent of the 2026 companies were profitable at scale, down from 72 per cent in 2022. Their median return on equity (ROE) – a key measure of net profit generated per dollar of shareholder investment – was 10 percentage points lower than the 2022 batch, with average ROE down by more than 17 percentage points. The numbers suggest many firms are less commercially proven despite their technological progress, according to the report. “We think eventually it is commercial validation that will drive post-IPO performance and investor interest in new IPOs,” the analysts said.

US export curbs have reshaped China’s tech scene around ‘chokepoints’: report

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}China’s tech start-ups now focus far more on key ‘chokepoint’ technologies, especially in the chip supply chain, Morgan Stanley report finds

China’s tech start-ups now focus far more on key ‘chokepoint’ technologies, especially in the chip supply chain, Morgan Stanley report finds