Semiconductor stocks across the globe slipped on Monday (Oct 10) after fresh US curbs on China’s access to American technology added to a disappointing start to the earnings season, stoking concerns that the industry’s downturn is far from over.

In China, bellwether Semiconductor Manufacturing International fell 4 per cent in Hong Kong, the most since Sep 2. Declines were steeper in smaller stocks. Hua Hong Semiconductor sank 9.4 per cent, while Shanghai Fudan Microelectronics Group plummeted 20 per cent, the most since July 2020. Will Semiconductor and Maxscend Microelectronics dropped more than 6 per cent each.

In the United States, artificial intelligence chipmakers Nvidia and Advance Micro Devices both fell more than 1.2 per cent in premarket trading. Chip-tool maker Applied Materials dropped 1.2 per cent, while peer ASML Holding tumbled as much as 3.2 per cent in Amsterdam. These decline followed a 6.1 per cent drop in the Philadelphia Semiconductor Index on Friday.

The US measures include restrictions on the export of some types of chips used in artificial intelligence and supercomputing, and also tighter rules on the sale of semiconductor equipment to any Chinese company. Separately, the US also added more Chinese firms to a list of companies that it regards as “unverified,” which means US suppliers will face new hurdles in selling technologies to those entities. 

The new US rules come at a time when the chip industry is already grappling with an ominous start to the earnings season and has gone from a worldwide shortage of chips to a glut in a matter of months due to the boom-and-bust nature of semiconductor demand. 

Samsung Electronics, the world’s largest memory-chip maker, and PC-processor maker AMD reported results last week that suggested a deeper-than-feared slowdown ahead. 

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The curbs are a “big setback to China” and “bad news” for global semiconductors, Nomura Holdings analyst David Wong wrote in a note. 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.

Among other stocks, Naura Technology Group, plunged by the daily limit of 10 per cent on the mainland, while Advanced Micro-Fabrication Equipment and ACM Research Shanghai fell more than 16 per cent each.

The US Commerce Department has added Beijing Naura Magnetoelectric Technolog, a subsidiary of Naura in its Unverified List, the company said in a filing.

To be sure, the intensifying Sino-American tensions could spur Beijing to step up support for homegrown firms in a bid to achieve its goal of becoming an independent chip powerhouse.

The fall in Chinese chip stocks may cast a pall over the sector globally. Markets in Japan, South Korea, Taiwan and Malaysia will get a chance to react on Tuesday as they were closed on Monday. 

“This will not only be negative to the Chinese semiconductor industry but also indirectly impact global semiconductor makers’ business opportunities longer term,” Citigroup analysts including Laura Chen wrote in a note.

Broader Chinese equity market also saw declines on Monday after returning from the Golden Week holiday, hurt by a global equities selloff and bleak holiday-spending data that deepened concerns about an economic recovery. BLOOMBERG