Chinese chipmakers slump as beijing sends speculation warning

[BEIJING] China's microchip industry is feeling the heat of Beijing's regulatory scrutiny.

A warning in state media last Friday that regulators will show no tolerance in cracking down on speculators in the chip market sent related stocks lower on Monday.

China's biggest chip foundry Semiconductor Manufacturing International Corp (SMIC) dropped 5 per cent in Hong Kong, while Hua Hong Semiconductor tumbled 5.7 per cent in its worst drop in nearly three months. Shanghai-listed Will Semiconductor fell 5.7 per cent, while Hubei Tech Semiconductors was down 3.3 per cent.

For investors, the warning presents another challenge in an increasingly uncertain regulatory landscape, coming soon after the launch of a probe this month into possible chip price manipulation - chilling a sector buoyed by a global semiconductor shortage that is approaching the 12-month mark.

SMIC has also rallied this year on bets that semiconductor firms will benefit from state largesse, even as Beijing pursues a broader crackdown in the tech sector that has ensnared the likes of Alibaba Group Holding and Tencent Holdings.

In the commentary on Friday, broadcaster CCTV said that some car chip distributors have "maliciously" pushed up prices. It urged sellers to be disciplined and refrain from hoarding components.

A prolonged global chip shortage has driven up prices of chipsets, complicating China's bid to gain clout in advanced components used in devices from smartphones to base stations. Chinese carmakers, for example, import about 90 per cent of the high-end chips they require.

Traders have been cautiously looking for signs as to what other sectors could next be targeted by Beijing after a ban on profits for after-school tutoring firms triggered a sell-off last month, amid concerns over further crackdowns in digital gaming, e-cigarettes and property.

BLOOMBERG