Business Maverick: Chipmaker retreat engulfs TSMC, Samsung with $240bn wiped out

Business Maverick: Chipmaker retreat engulfs TSMC, Samsung with $240bn wiped out

Taiwan Semiconductor Manufacturing plunged more than 7%, the most since May 2021, while Samsung Electronics dropped the most in a year. Tokyo Electron lost as much as 5.8%. Markets in South Korea, Japan and Taiwan were shut on Monday for holidays, when the Philadelphia Stock Exchange Semiconductor Index sank to its lowest close since late 2020 following a two-day rout of over 9%.

South Korea’s won slumped as much as 1.6% versus the dollar while the Taiwan dollar dropped 0.7%. Stock benchmarks in the two nations were the worst performers in Asia on Tuesday. The US announced the export curbs Friday, and there have been suggestions that similar actions may be deployed in other countries to ensure international cooperation.

The latest curbs are likely to fuel a knock-on impact across the sector’s supply chain and add to a growing list of challenges for technology shares including a hawkish Federal Reserve and tensions across the Taiwan Strait. The current rout has already wiped out more than $240-billion from chip stocks worldwide since Thursday’s close, according to data compiled by Bloomberg.

“The latest US move would prompt China to move faster in fostering the domestic chip industry,” said Omdia analyst Akira Minamikawa. “Japanese firms should continue trading with Chinese firms with goods not restricted because the business is business. But they should be ready for a future – maybe in a decade or two – when they lose all the Chinese customers as a result of the current tension dialling up speed of the Chinese efforts.”

The ban is expected to have far-reaching implications. For companies with plants in China – including non-US ones – the rules will create additional hurdles and require government signoff. South Korea’s SK Hynix is one of the world’s largest makers of memory chips and has facilities in China – part of a supply network that sends components around the world. Its shares slid 3.5% on Tuesday before paring losses.

Chinese state media and officials have responded to Biden’s move in recent days, warning of economic consequences and stirring speculation about potential retaliation.

“With the latest measure, it would become difficult for China to manufacture and develop semiconductors because most semiconductor equipment are dominated by the US and its allies, such as Japan and Netherlands,” Chae Minsook, an analyst at Korea Investment & Securities, wrote in a report. “It is impossible to maintain the chip industry without adopting advanced equipment.”

The measures seek to stop China’s drive to develop its own chip industry and advance its military capabilities. They include restrictions on the export of some types of chips used in artificial intelligence and supercomputing and tighten rules on the sale of semiconductor manufacturing equipment to any Chinese company.

The US is seeking to ensure that Chinese companies don’t transfer technology to the country’s military and that chipmakers in China don’t develop the capability to make advanced semiconductors themselves.

The curbs are a “big setback to China” and “bad news” for global semiconductors, Nomura Holdings analyst David Wong wrote in a note Monday. China’s localisation efforts may also be “at risk as it may not be able to use advanced foundries in Taiwan and Korea,” he wrote. BM/DM

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