Chip Stocks in Asia Plunge Amid U.S. Export Curbs

TSMC Leads Decline in Asian Chip Stocks

Asian chip stocks dropped sharply on Thursday, following a significant selloff on Wall Street. This decline was triggered by a report indicating that the United States is considering tighter restrictions on the export of advanced semiconductor technology to China.

Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker, was severely impacted. Over the last two days, TSMC’s market value decreased by approximately T$2 trillion ($61.35 billion). This decline was compounded by both the U.S. curbs and comments from U.S. Republican presidential nominee Donald Trump, suggesting that Taiwan should pay America for its defence.

Broader Impact on Asian Tech Giants

TSMC’s shares fell more than 3%. Other major technology companies were also affected. South Korea’s leading chipmakers, Samsung Electronics and SK Hynix, saw their shares drop by 1.85% and 4.1%, respectively. In Japan, Tokyo Electron’s shares plummeted over 8%.

The Global X Asia Semiconductor ETF decreased by 2.7%, reducing its annual gains to 13.5%.

Potential U.S. Measures Raise Investor Concerns

The Bloomberg News report, published during Asian trading hours on Wednesday, indicated that President Joe Biden’s administration might use the foreign direct product rule. This rule would allow the U.S. government to block the sale of products made using American technology. Companies like Tokyo Electron and the Netherlands’ ASML could be affected by these potential restrictions.

TSMC’s American Depository Receipts fell by 8% on Wednesday. In its first-quarter earnings report, TSMC revealed that 69% of its revenue came from North American customers and 9% from China.

Washington’s protective stance towards its semiconductor industry, seen as vital for competing against China, has alarmed investors. “It seems macro and geopolitical factors played a bigger role than fundamentals,” said Kang Jin-hyeok, an analyst at Shinhan Securities in Seoul.

Impact on ASML and Broader Market Movements

ASML, which sells 49% of its lithography systems to China, saw its shares fall over 10% on Wednesday. Despite this, ASML reported strong second-quarter earnings, with a notable rise in AI-linked bookings.

The Biden administration’s aggressive moves to limit Chinese access to advanced chip technology, including restrictions on AI processors from companies like Nvidia, have further strained Sino-U.S. relations. This has accelerated a shift among investors from big tech stocks to smaller value ones, anticipating that lower U.S. rates will benefit smaller companies.

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

Tech stocks have outperformed this year due to the global AI boom. The Nasdaq is up 20%, while the S&P 500 has surged 17%. However, Thursday’s selloff left major Asian bourses in the red, with Tokyo’s Nikkei down 2%, Taiwan stocks falling 2.3%, South Korea’s KOSPI index dropping 1.34%, and Hong Kong’s Hang Seng tech index losing 1.5%.