Chip Stocks in Asia Tumble on US Export Restrictions Concerns

Asia’s Chip Stocks Tumble on Tighter U.S. Export Curbs to China

Chip stocks in Asia took a heavy blow on Thursday, following a significant selloff on Wall Street triggered by reports of the United States considering stricter restrictions on exports of advanced semiconductor technology to China.

Among the hardest hit companies was Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker, which witnessed a staggering drop of roughly T$2 trillion ($61.35 billion) in market value over just two days.

TSMC, set to report earnings later on Thursday, faced a double hit this week from news of the potential U.S. curbs and comments from U.S. Republican presidential nominee Donald Trump suggesting that Taiwan should pay for American defense.

Major players in the technology sector like Samsung Electronics, SK Hynix in South Korea, and Tokyo Electron in Japan also saw significant declines, with Tokyo Electron slumping more than 8%.

The Global X Asia Semiconductor ETF was down 2.7%, cutting its gains for the year to 13.5%.

According to a Bloomberg News report released during Asian trading hours on Wednesday, the Biden administration is considering a measure known as the foreign direct product rule, which could allow the U.S. government to prevent the sale of products made using American technology.

This potential move could have implications for companies like Tokyo Electron and Netherlands-based ASML.

ASML, which saw its shares drop over 10% on Wednesday, has significant sales to China, making it a likely target under the proposed U.S. restrictions.

With increasing concerns about U.S.-China competition in the semiconductor manufacturing industry, investors are closely watching the impact of potential export curbs.

The latest developments in Sino-U.S. relations have led to a reevaluation of investment strategies, with investors shifting away from Big Tech stocks into smaller value companies due to the belief that lower U.S. rates will benefit smaller firms.

Despite a strong year for tech stocks driven by the global AI boom, the selloff in Asia on Thursday led to major market declines, with Tokyo’s Nikkei down 2%, Taiwan stocks sliding 2.3%, and South Korea’s KOSPI index falling 1.34%.

The Hang Seng tech index in Hong Kong also experienced a 1.5% loss as tech stocks struggled amid the uncertainty surrounding U.S. export policies to China.