The Business Times

Chipmaker rout engulfs TSMC, Samsung with US$240b wiped out

Published Tue, Oct 11, 2022 · 11:28 AM

 ASIA’S top chip stocks tumbled on Tuesday (Oct 11), ensnared in an escalating US-China tech race that has erased more than US$240 billion from the sector’s global market value.

Taiwan Semiconductor Manufacturing, the world’s largest contract chipmaker, plunged a record 8.3 per cent while Samsung Electronics and Tokyo Electron also declined. The selloff spread to the foreign-exchange market as investors tally up the damage from the sweeping curbs the US is imposing on companies that conduct technology business with China.

The Biden administration measures erect barriers of entry to China’s market by limiting the ability of US firms to sell equipment and tech to their Chinese counterparts. There are concerns that the restrictions could spread if Washington widens the initiative to include other countries, while questions also remain over the scope and final impact of the moves.

“It is difficult to call a bottom on the performance of the chip sector,” said Gary Dugan, chief executive officer of the Global CIO Office. “The big story is that the West is becoming profoundly more concerned about security around any form of technology. We see no reason to re-enter the sector for the moment despite the profound poor performance.” 

US chip stocks were on track to decline for a third day, with Nvidia, Advanced Micro Devices, Qualcomm and Texas Instruments all down more than 1 per cent before the bell. Chip-tool maker ASML Holding traded down 2.3 per cent in Amsterdam, bringing three-day losses to more than 11 per cent.

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. Washington 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. 


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The US announced the export curbs on Friday, and there have been suggestions that similar actions may be deployed in other countries to ensure international cooperation. The announcement spurred a two-day rout of over 9 per cent in the Philadelphia Stock Exchange Semiconductor Index that saw it close on Monday at its lowest level since November 2020. Markets in Korea, Japan and Taiwan were shut that day for holidays.

Samsung lost as much as 3.9 per cent, the most in a year. South Korea’s SK Hynix, one of the world’s largest makers of memory chips that has facilities in China – is part of a supply network that sends components around the world. Its shares slid 3.5 per cent before paring losses.

The current rout has already wiped out more than US$240 billion from chip stocks worldwide since Thursday’s close, according to data compiled by Bloomberg.

The selloff extended to currency markets, with the South Korean won sliding as much as 1.8 per cent versus the greenback while the Taiwan dollar declined 0.7 per cent.

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

The US measures seek to stop China’s drive to develop its own chip industry and advance its military capabilities. The impact could extend well beyond semiconductors and into industries that rely on high-end computing, from electric vehicles and aerospace to gadgets like smartphones.

The fallout is already being felt. KLA will stop offering some supplies and services from Wednesday to China-based customers including SK Hynix to comply with the recent US regulations, Reuters reported, citing a person familiar with the situation. 

Shares of Chinese chipmakers extended their recent losses on Tuesday, with Morgan Stanley saying that the broader restrictions around supercomputers and multinational capital investment in China could be “disruptive.”

Chinese state media and officials have responded to Biden’s move in recent days, warning of economic consequences and stirring speculation about potential retaliation.

“With the latest measure, it would become difficult for China to manufacture and develop semiconductors because most semiconductor equipment are dominated by US and its allies,” such as Japan and Netherlands, Chae Minsook, an analyst at Korea Investment & Securities, wrote in a report. “It is impossible to maintain the chip industry without adopting advanced equipments.” BLOOMBERG


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