China's hidden technology champions

Please find below our latest thoughts on China:

• Earlier this month, the second Beijing Humanoid Robot Games featured a robot winning the 100m in 9.39 seconds, comfortably ahead of Usain Bolt's world record.
• While the event was largely a technology showcase rather than a true sporting contest, it offered another reminder of the pace of innovation taking place across China's technology sector.
• Despite headlines like these, widespread commercial adoption of humanoid robots is still some way off. The physical hardware has advanced rapidly, but the "brains" behind these systems still require far more training data, real-world experience and refinement before deployment at scale becomes practical.
• Share prices across the technology sector have taken a breather in recent weeks. However, underlying fundamentals remain healthy. Many companies delivered strong results during the latest earnings season and continue to see improving earnings expectations.
• That said, the intense focus on China's latest breakthroughs, whether in humanoid robotics or open-source large language models (Chart 1), can create a somewhat misleading picture.

• China's technology universe is often viewed through two lenses: either the well-known internet and e-commerce giants, or the newer and more speculative start-ups making headlines.
• In reality, a large part of the story sits elsewhere.
• Beneath the surface is a broad group of established technology hardware companies, many of which have been operating successfully for decades. Their businesses span areas such as copper clad laminates (CCLs), printed circuit boards (PCBs), optical networking equipment, memory products and high-speed interconnect chips, to mention just a few.
• Many of these companies trace their origins to the early years of China's opening-up period, when the country was emerging as a major manufacturing hub for global electronics supply chains.
• Four decades ago, firms were supplying components used in everyday household products such as refrigerators and washing machines. As end products became more sophisticated, so too did China's electronics industry. Walkmans became smartphones. Desktop computers became laptops and tablets. Internal combustion engines gave way to electric vehicles. Mobile networks evolved from 3G to 5G.
• Throughout that evolution, suppliers were forced to keep pace. To remain competitive, they invested heavily in manufacturing capabilities, engineering expertise and research and development, often serving some of the world's leading consumer, industrial and technology companies.
• This long history helps explain why many Chinese firms are now well positioned within today's AI investment cycle.
• In some cases, the same companies that once supplied PCBs for dishwashers are now producing advanced boards used in Nvidia AI servers and domestic AI data centres.
• Rather than appearing overnight, many of today's beneficiaries are the results of decades of accumulated knowhow, continuous investment and steady movement up the value chain.

• The story also illustrates why attempts to reshape global technology supply chains remain so challenging in practice.
• Optical transceivers are a good example. These devices have become a critical component of modern AI infrastructure. Chinese companies occupy a leading position globally in this market. The Federal Communications Commission in the US has recently proposed a ban on imports.
• At the same time, however, China is also a major supplier of indium phosphide, an important material used in the lasers inside optical transceivers. If Beijing were to restrict exports, it would create a significant headache for optical transceiver producers globally.
• These interdependencies illustrate the complexity of modern technology supply chains and suggest that further escalation of tariffs or technology restrictions is likely to be constrained, at least to some degree, by the disruption such measures would create.
• So, what does this mean for investors?
• One observation is that many China technology exchange-traded funds (ETFs) provide exposure primarily to a relatively narrow segment of the market, particularly large internet and platform companies listed in Hong Kong.
• By contrast, significant parts of China's technology hardware value chain, especially within the onshore A-share market, often receive far less attention.
• That has become increasingly relevant as technology-related businesses now account for a much larger share of China's equity market than they did in the past (Chart 2). Today, technology companies represent around onethird of the MSCI China A Onshore Index, compared with less than 10% a decade ago.¹
• As a result, investors have access to a much broader range of businesses than many realise, from established hardware manufacturers supporting AI infrastructure to newer companies developing the next generation of technologies.
• For us, one of the more interesting aspects of China's technology story is that many of the companies helping to shape the future are not new at all. They are long-established businesses whose capabilities have been built gradually over decades, often hidden in plain sight.

¹ IDS GmbH as at 24 August 2026