Investing.com– Stocks in Chinese chipmaking, particularly those in the foundry sector, rose sharply on Tuesday as media reports indicated progress in domestic lithography technology, which could allow local players to reject US chip sanctions.

Semiconductor Manufacturing International Corp (HK:)- the country’s largest chipmaker by capacity- jumped 7.4% in Hong Kong trade, while Sunny Optical (OTC:) Technology Group Co Ltd (HK:) rose 5.4%. Hua Hong Semiconductor Ltd (HK:) added 3.4%.

Listed in Shanghai The Semiconductor Co Ltd Shanghai (SS:) and Shenzhen-listed NAURA Technology Group Co Ltd (SZ:) rose between 1.5% and 2%.

The gains in Chinese chip stocks came as local media reported a breakthrough in Chinese chipmaking technology, particularly in extreme ultraviolet lithography- a key technology for manufacturing chips smaller than 7 nanometers.

Scientists at the Harbin Institute of Technology claim to have developed a compact and stable source of EUV light that can be used to manufacture advanced, sub-7nm chips.

Currently, the Dutch company ASML Holding NV (AS:) is the only main manufacturer of EUV lithography equipment, and under current US sanctions, is prohibited from selling the technology to Chinese entities.

But China developing its own EUV technology allows local chipmakers to bypass US sanctions and produce advanced AI chips that do not depend on US technology.

The outgoing Biden administration recently announced the most aggressive round of sanctions against China’s chip industry, essentially blocking domestic developers from advances in computer technology.

This was done with the intention of slowing China’s progress in the development of artificial intelligence – a sector that has been targeted in recent years.

President Donald Trump- who took office on Monday- is expected to maintain a hawkish stance against China.

But Chinese chip-making stocks, particularly those in the foundry sector, rallied on the prospect of increased domestic demand, as Beijing also began encouraging businesses to source chips locally.