New Delhi, July 8 -- When last month the chip industry's elite descended on Taipei for Computex, an annual trade show, two topics dominated discussions. The first was artificial intelligence, which has turned semiconductors into one of the world's most profitable industries. The second was China. Its chipmakers were absent from the event, but their shadow was long.

The fascination with China is easy to explain. A week before Computex, Huawei, the country's tech-hardware champion, unveiled a technique that stacks layers of circuits onto a chip to get better performance without relying on the latest Western manufacturing tools. Investors are also signalling confidence. The share prices of semiconductor firms on Hong Kong's stock market has...