Chip stocks in Asia tumbled yesterday while their European counterparts got off to a tentative start after a news report that the US was considering tighter curbs on exports of advanced semiconductor technology to China.
Among the worst hit in Asia were shares of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, which has shed roughly NT$1.7 trillion (US$52.14 billion) in market value over two days.
Remarks from former US president Donald Trump that Taiwan should pay the US for its defense added to the wave of bad news, and sent shares of TSMC down 2.43 percent in Taipei trading after the chipmaker’s US depositary receipts plunged almost 8 percent on Wall Street overnight.
Photo: Florence Lo, Reuters
In its earnings results on Thursday, TSMC said it expects third-quarter revenue to surge by as much as 34 percent from a year earlier, after posting a quarterly net profit that beat market expectations.
Other technology behemoths in Asia similarly suffered losses, with South Korean chipmaker SK Hynix Inc sliding 3.6 percent and Japan’s Tokyo Electron Ltd slumping 8.75 percent.
The Global X Asia Semiconductor exchange-traded fund, which lists SK Hynix, Tokyo Electron, TSMC and Samsung Electronics Co among its major holdings, fell 1.74 percent, reducing gains for the year to 16.7 percent.
Over in Europe, the STOXX 600 index rose 0.2 percent, although the technology subindex fell to a six-week trough and last traded 0.37 percent lower.
US President Joe Biden’s administration is weighing a measure called the foreign direct product rule that allows the US government to stop a product from being sold if it was made using US technology, a Bloomberg News report published during Asian trading hours on Wednesday said.
That would mean restrictions on companies such as Tokyo Electron and the Netherlands’ ASML Holding NV.
ASML shares ticked up 0.3 percent on Thursday, reversing some of its more than 10 percent decline in the previous session despite releasing forecast-beating second-quarter earnings on the same day that showed a rise in artificial intelligence (AI)-linked bookings.
Washington’s protectiveness toward the US semiconductor manufacturing industry, which it views as strategically important for competing against China, has raised increasing concerns for investors.
Those concerns overrode the strong recent earnings releases from ASML, Shinhan Securities Co analyst Kang Jin-hyeok said in Seoul, adding that ASML’s heavy sales to China make it a target of the proposed US curbs.
“It seems macro and geopolitical factors played a bigger role than fundamentals,” Kang said.
China accounted for about 49 percent of ASML’s lithography system sales in the second quarter, representing about 20 percent of the Dutch firm’s order backlog.
TSMC said in its first-quarter earnings report that 69 percent of its revenue was from customers based in North America and 9 percent was from China. Similarly, a March corporate filing from SK Hynix stated 31 percent of its sales came from China last year.
The Biden administration has moved aggressively to curb Chinese access to cutting-edge chip technology, including sweeping restrictions issued in October last year to limit exports of AI processors designed by firms, including Nvidia Corp.
The latest wrinkles in Sino-US relations have sped up what appeared to be initial signs of investors’ rotation from big tech stocks into smaller value ones, considering that lower US rates would benefit smaller companies.
The global AI boom has driven a blistering rally in tech stocks this year that has surpassed records, with the NASDAQ up 20 percent to date, while the S&P 500 has surged 17 percent.
“Positioning had become very extreme in the semi-conductor/AI space and the import curb comments catalyzed a de-risking event,” said Jon Withaar, who manages an Asia special situations hedge fund at Pictet Asset Management Ltd.
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