Asian chip stocks tumble on fear of US mulling tighter curbs on tech export

TSMC fell more than 3 per cent, joining other technology behemoths such as South Korea’s major chipmakers Samsung Electronics and SK Hynix, which were down 1.85 per cent and 4.1 per cent, respectively, and Japan’s Tokyo Electron, which slumped more than 8 per cent.

 

The Global X Asia Semiconductor ETF was down 2.7 per cent, reducing gains for the year to 13.5 per cent.

 

That would potentially mean restrictions on companies such as Tokyo Electron and Netherlands’ ASML.

 

TSMC’s American Depository Receipts slid 8 per cent on Wednesday. In its first-quarter earnings report, TSMC said 69 per cent of revenue was from customers based in North America and 9 per cent came from China.

 

Washington’s protectiveness towards the US semiconductor manufacturing industry, which it views as strategically important for competing against China, has raised increasing concerns for investors.

 

“It seems macro and geopolitical factors played a bigger role than fundamentals,” said Kang Jin-hyeok, an analyst at Shinhan Securities in Seoul.

 

Kang was referring to the strong recent earnings releases from Samsung and ASML, but noted the latter’s heavy sales to China make it a target of the proposed US curbs.

 

China accounted for about 49 per cent of ASML’s lithography system sales in the second quarter and represents about 20 per cent of its order backlog.

 

ASML shares fell more than 10 per cent on Wednesday, despite forecast-beating second-quarter earnings that showed a rise in artificial intelligence-linked bookings.

 

The Biden administration has moved aggressively to curb Chinese access to cutting-edge chip technology, including sweeping restrictions issued in October to limit exports of AI processors designed by firms including AI darling Nvidia .

 

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, on the view that lower US rates will benefit smaller companies.

 

“Positioning had become very extreme in the semi-conductor/AI space and the import curb comments catalysed a de-risking event,” said Jon Withaar, who manages an Asia special situations hedge fund at Pictet Asset Management.

 

Tech stocks have outperformed this year on the back of the global AI boom, with the Nasdaq up 20 per cent, while the S&P 500 has surged 17 per cent.

 

But the selloff in Asia on Thursday left major bourses in the red, with Tokyo’s Nikkei down 2 per cent, while Taiwan stocks slid 2.3 per cent.

 

First Published: Jul 18 2024 | 10:18 AM IST