On Thursday, Asian semiconductor stocks saw a sharp decline, with Taiwan Semiconductor Manufacturing Co. (TSMC) experiencing the largest drop in stock price. TSMC’s market value evaporated approximately 2 trillion New Taiwan Dollars (about 61.35 billion US dollars) in just two days, likely impacted by the potential tightening of advanced chip exports to China by the United States.
According to Reuters, Asian semiconductor stocks plummeted due to the news of the U.S. tightening exports of advanced chips to China and the decline in U.S. chip stocks. TSMC, the world’s largest contract chip manufacturer, suffered the biggest plunge in stock price.
TSMC’s stock price fell by over 3% on Thursday, while major chip manufacturers in South Korea, Samsung Electronics and SK Hynix, saw their stock prices drop by 1.85% and 4.1% respectively. Tokyo Electron Ltd., also known as Tokyo Electron, experienced a drop of over 8%, and the Global X Asian Semiconductor ETF fell by 2.7%, reducing its gains for the year to 13.5%.
Bloomberg reported on the 17th that the Biden administration is considering implementing a measure called the “Foreign Direct Product Rule” (FDPR). This would mean that companies like Tokyo Electron and the Dutch company ASML, suppliers of chip manufacturing equipment, could face strict trade restrictions from the U.S. if they continue to provide advanced chip technology to China.
Under the FDPR, products manufactured abroad, even if they use minimal U.S. technology, would be subject to U.S. export controls.
TSMC’s American Depositary Receipts (ADR) fell by 8% on Wednesday. In its first-quarter financial report, TSMC stated that 69% of its revenue comes from North America, while 9% comes from China.
Furthermore, ASML’s stock price dropped by over 10% on Wednesday. In the second quarter, about 49% of ASML’s lithography system sales went to China, accounting for approximately 20% of its outstanding orders.
Kang Jin-hyeok, an analyst at Shinhan Securities in Seoul, stated, “The impact of macroeconomic and geopolitical factors seems to be greater than fundamental factors.” He was referring to the strong financial results recently announced by ASML.
Earlier, the Biden administration had taken a series of measures to curb China’s access to cutting-edge chip technology. Last October, exports of AI processors designed by companies like NVIDIA to China were completely restricted to prevent Beijing from acquiring advanced U.S. technology to enhance its military capabilities.
Amid the global AI boom driving the tech sector this year, the Nasdaq index has risen by 20%, and the S&P 500 has surged by 17%.
However, the sharp decline in Asian semiconductor stocks on Thursday led to mixed performance in major stock markets. The Tokyo Nikkei Index dropped by 2%; the Taiwan stock market fell by 2.3%; South Korea’s benchmark KOSPI index declined by 1.34%; and Hong Kong’s Hang Seng Tech Index decreased by 1.5%.