Chip stocks across Asia experienced significant declines on Thursday, reacting to reports suggesting heightened U.S. restrictions on advanced semiconductor technology exports to China. This news sent shockwaves through the market, particularly affecting Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker, which saw its market value plummet by T$1.7 trillion ($52.13 billion) over two days.
U.S. Republican presidential nominee Donald Trump’s remarks on Taiwan’s defense payments to the U.S. further exacerbated the situation, pushing TSMC shares down by 2.4%. Despite this downturn, TSMC reported strong earnings on Thursday, forecasting a third-quarter revenue surge of up to 34% year-on-year, surpassing market expectations.
Elsewhere in Asia, technology giants like SK Hynix in South Korea and Tokyo Electron in Japan also faced losses, with SK Hynix sliding 3.6% and Tokyo Electron plummeting 8.75%. The Global X Asia Semiconductor exchange-traded fund, which includes major players like SK Hynix and TSMC, fell 1.74%, reducing its year-to-date gains to 16.7%.
In Europe, the STOXX 600 index managed a slight 0.2% rise, although its technology sub-index hit a six-week low, closing 0.37% lower. The market’s cautious sentiment stemmed from a report released during Asian trading hours indicating that the Biden administration was considering implementing stricter export controls through measures like the foreign direct product rule, potentially impacting companies such as Tokyo Electron and ASML in the Netherlands.
Despite ASML’s recent second-quarter earnings beating forecasts, its shares had previously dropped over 10% but saw a modest recovery of 0.3% on Thursday. Analysts highlighted concerns over Washington’s protective stance toward the U.S. semiconductor industry, which is crucial for competitive positioning against China.
Kang Jin-hyeok, an analyst at Shinhan Securities in Seoul, emphasized that macroeconomic and geopolitical factors outweighed strong fundamentals, pointing out ASML’s significant sales to China, which could make it a target under proposed U.S. restrictions.
ASML disclosed that China accounted for approximately 49% of its lithography system sales in the second quarter and represented about 20% of its order backlog. Similarly, TSMC noted in its first-quarter earnings that a significant portion of its revenue came from North America, with a smaller fraction originating from China.
The Biden administration’s proactive measures to limit Chinese access to cutting-edge chip technology, including previous restrictions on AI processors, underscored growing investor apprehensions. These concerns overshadowed the tech sector’s robust performance driven by the global AI boom, with the Nasdaq up 20% year-to-date and the S&P 500 surging 17%.
Jon Withaar, managing an Asia special situations hedge fund at Pictet Asset Management, described the market reaction as a “de-risking event” following extreme positioning in semiconductor and AI stocks. This adjustment reflects broader uncertainties fueled by evolving Sino-U.S. relations and their implications for global tech supply chains.
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