News Report: US Considering Tighter Curbs on Semiconductor Technology Exports to China

The chip stocks in Asia took a hit yesterday after reports surfaced that the US was contemplating stricter controls on exports of advanced semiconductor technology to China. This news sent shockwaves through the market, with Taiwan Semiconductor Manufacturing Co (TSMC) being one of the hardest hit, losing NT$1.7 trillion in market value over two days.

Adding to the negative sentiment was former US president Donald Trump’s comments suggesting that Taiwan should pay for US defense. This further weighed down TSMC’s shares, which dropped 2.43 percent in Taipei trading after a significant decline in its US depositary receipts on Wall Street.

In a glimmer of hope, TSMC reported strong earnings results, projecting a surge in third-quarter revenue and posting a quarterly net profit that exceeded market expectations. However, other tech giants in Asia weren’t as fortunate, with companies like SK Hynix Inc and Tokyo Electron Ltd also experiencing losses.

The Global X Asia Semiconductor exchange-traded fund, which includes major players like SK Hynix, Tokyo Electron, TSMC, and Samsung Electronics Co, fell 1.74 percent. Meanwhile, in Europe, despite the STOXX 600 index rising, the technology subindex saw a decline.

The potential US restrictions on semiconductor technology exports have raised concerns among investors, overshadowing positive earnings reports. ASML Holding NV, for example, managed to reverse some losses despite facing setbacks in the previous session.

The Biden administration’s focus on protecting the US semiconductor industry from Chinese competition has contributed to the unease in the market. Companies like ASML, with heavy sales to China, are particularly vulnerable to the proposed US curbs.

Amidst these developments, the global AI boom continues to drive a rally in tech stocks. However, the recent events have triggered a de-risking event, prompting investors to reconsider their positions in the semiconductor/AI sector.

The friction between the US and China, combined with the ongoing technological competition, has created a volatile environment for chip stocks. As the situation unfolds, investors are closely watching for further developments that could impact the industry.