Chipmaker routine swallows TSMC, Samsung with $240 billion wiped out

(Bloomberg) — Chip-related stocks tumbled in Japan, South Korea and Taiwan, wiping more than $240 billion from the sector’s global market value after the Biden administration restricted China’s access to semiconductor technology.

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Taiwan’s semiconductor manufacturer, the world’s largest chip maker, fell 8.3% on Tuesday. Samsung Electronics Co. also declined. and Tokyo Electron Ltd out of concern that US efforts to ensure international cooperation will hamper their ability to export to China.

Selling spread in the currency markets. The South Korean won fell more than 1.6% against the dollar while the Taiwanese dollar fell 0.7% amid losses in stock markets.

Felix Lee, Equity Analyst at Morningstar Inc. , in a note: “We believe that short-term uncertainty about foundry demand will increase, as China is the second largest cloud computing market in the world.” “The new shock could dampen sentiment in a sector already suffering from weak consumer electronics demand.”

These restrictions are expected to have far-reaching effects. For companies with factories in China – including non-US companies – the rules will create additional obstacles and require government approval. The move is also set to fuel a spillover effect across the sector’s supply chain and add to a growing list of challenges for tech stocks including a hawkish Federal Reserve and tensions across the Taiwan Strait.

The US announced the export restrictions on Friday, and there have been suggestions that similar measures may be rolled out to other countries to ensure international cooperation. The announcement led to a two-day defeat of more than 9% in the Philadelphia Stock Exchange’s semiconductor index which saw Monday’s close at its lowest since November 2020. Markets in Korea, Japan and Taiwan were closed that day for the holidays.

Samsung lost up to 3.9%, the most in a year. SK Hynix Inc. South Korea, one of the world’s largest memory chip manufacturers with facilities in China – is part of a supply network that sends components around the world. Its shares fell 3.5% before paring losses.

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

David Wong, an analyst at Nomura Holdings, wrote in a note Monday that the restrictions represent a “major setback for China” and “bad news” for global semiconductors. He also wrote that China’s resettlement efforts may be “in jeopardy because it may not be able to use the advanced foundries in Taiwan and Korea”.

Shares of Chinese chip makers extended their latest losses on Tuesday, as Morgan Stanley said broader restrictions around supercomputers and multinational capital investments in China could be “devastating.”

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

“The latest US move will prompt China to move faster in boosting the domestic chip industry,” said Omdia analyst Akira Minamekawa. “Japanese companies should be ready for the future – perhaps in a decade or two – when they will lose all Chinese customers as a result of the current tension accelerating Chinese efforts.”

The measures are aimed at halting China’s efforts to develop its own chip industry and boost its military capabilities. They include restrictions on the export of some types of chips used in artificial intelligence and supercomputing and tighter rules on the sale of semiconductor manufacturing equipment to any Chinese company.

The United States is seeking to ensure that Chinese companies do not transfer technology to the country’s military and that China’s chip makers do not develop the ability to make advanced semiconductors themselves.

Chae Minseok, an analyst at Korea Investment & Securities, wrote in a report. “It is impossible to sustain the chip industry without the use of sophisticated equipment.”

(updates throughout)

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