The recent reports of the U.S. considering tighter export restrictions have sent shockwaves through the chip stocks in Asia. This news has led to a tech selloff on Wall Street, resulting in a significant drop in the share prices of major chip companies in the region. Taiwan Semiconductor Manufacturing Company, the world’s largest chip supplier, saw its shares plummet by as much as 4.3% in Asia trade, before partially recovering. The ripple effect was also felt by TSMC’s suppliers, with companies like Tokyo Electron and Screen Holdings recording sharp declines of almost 9% and 8%, respectively. This downward trend extended to other chip-related stocks in Asia, such as Tokyo Ohka Kogyo and Organo, which witnessed drops of 4.53% and 3.13%, respectively.
The potential clampdown on firms exporting critical chipmaking equipment to China has further fueled tensions between the two economic powerhouses. This move is likely to have far-reaching implications on the entire semiconductor industry, as highlighted by Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group. She emphasized that any trade restrictions or tariffs could adversely impact chip companies worldwide, given their pivotal role in the ongoing digitization across various sectors. While the short-term outlook appears bleak for chip stocks, Yoshioka believes that long-term investors can still find buying opportunities amid the market volatility. She stressed the importance of focusing on the potential of artificial intelligence in driving growth and innovation for businesses and consumers in the years ahead.
The Foreign Direct Product Rule (FDPR) allows the U.S. to impose controls on foreign-made products, even if they have minimal American technology content. This regulatory framework poses a significant challenge for non-U.S. companies, particularly those in the tech sector. The recent declines in Asian tech stocks were exacerbated by the sharp losses experienced by key players on Wall Street, such as ASML and Nvidia, which saw their stock prices drop by 12% and 7%, respectively. ASML Holdings, a leading producer of chip manufacturing machines, reported better-than-expected second-quarter earnings but still closed more than 12% lower due to market sentiments. The widespread negative impact was evident as other tech giants like Arm, AMD, Marvell, Qualcomm, and Broadcom also ended the trading day with losses exceeding 7%.
The remarks made by U.S. Republican presidential candidate Donald Trump further added to the geopolitical uncertainties surrounding the chip industry. Trump’s statements calling for Taiwan to pay the U.S. for defense and accusing the country of monopolizing America’s chip business have added to the growing tensions between the two nations. These geopolitical factors, coupled with the ongoing trade restrictions and market uncertainties, have created a volatile environment for chip stocks globally. Investors are closely monitoring the developments and assessing the potential risks and opportunities in the semiconductor sector amidst the evolving geopolitical landscape.