(Bloomberg) — Asian technology stocks fell for a second straight day on worries about the risk of tougher U.S. curbs on semiconductor exports to China.
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Tokyo Electron Limited, a Japanese semiconductor manufacturing equipment manufacturer8035.T) fell 11% and is on track to suffer its worst two-day drop since 2015. South Korean memory maker Samsung Electronics’ (005930.KS) shares fell 3.3%, while shares of major foundry Taiwan Semiconductor Manufacturing Co.2330.TW) closed down 2.4% on Thursday.
The drop mirrored declines among global peers overnight after reports the Biden administration had told allies it was considering tougher trade restrictions if companies such as Tokyo Electron and Netherlands-based ASML Holdings NV supply products to the US illegally.ASML) continues to provide China with access to advanced chip technology.
The decline also comes as global technology stocks have recently slumped amid signs of a shift away from what have been the market’s biggest drivers over the past year.The Bloomberg Asia Pacific Semiconductor Index is up more than 30% this year, despite falling about 5% this week.
“The broader impact on stock prices suggests this is more market sentiment than actual underlying concerns,” said Billy Leung, investment strategist at Global X Management, adding that any gradual tightening is unlikely to have a material impact given that trade restrictions remain an ongoing issue. “This could be an opportunity for investors to take profits in sectors that have outperformed significantly,” he said.
Still, news of the possible tougher restrictions comes amid growing geopolitical concerns, with pressure on TSMC mounting after President Donald Trump’s recent comments to Bloomberg Businessweek questioning whether the U.S. has an obligation to defend Taiwan.
Meanwhile, TSMC reported after the close of trading on Thursday that profit for its latest quarter beat expectations. During its earnings call, the company said it had received a 10% cut in its share of the profits from its flagship chipmaker, NVIDIA Corp.NVDAMorgan Stanley analyst Charlie Chan said in an earlier note that Chinese suppliers are likely to include discussions about “geopolitical risk mitigation strategies” on their agenda.
Nvidia supplier ASML saw its shares fall 11% in Amsterdam on Wednesday despite the strong orders. The Philadelphia Stock Exchange’s Semiconductor Index fell nearly 7%, its biggest drop since March 2020.
ASML and Tokyo Electron have borne the brunt of the share price decline following news that the US is considering imposing so-called Foreign Direct Product Rules (FDPR), which would allow restrictions on foreign products that contain even a small amount of US technology. This comes amid urging from rival US semiconductor equipment makers who feel that export restrictions to China are unfairly hitting them.
Meanwhile, data released on Thursday showed Japan’s exports of semiconductor manufacturing equipment (SPE) to China surged 84% in the first half of 2024 compared with the same period last year. The yen was about 11% weaker at the end of the first half of this year compared with the same period last year, likely helping to boost export values.
“We’ve been waiting for some time to see tighter SPE export controls on China, given China’s improving technological capabilities,” said Amir Anbarzadeh, a strategist at Asymmetric Advisors.
“What’s surprising is that the Dutch and Japanese governments are clearly not listening, and the U.S. is now relying on the FDPR to get its allies to comply, when companies like Applied Materials and Lam Research have complained about losing market share.”
—With assistance from James Mayger and Brett Miller.
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