(Bloomberg) — Asian technology stocks fell for a second straight day on worries about the risk of tougher U.S. curbs on semiconductor exports to China.
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Shares in Tokyo Electron, a Japanese chip-making equipment maker, are on track to fall as much as 11%, marking their worst two-day drop since 2015. Shares in South Korean memory maker Samsung Electronics fell as much as 3.3%, while shares in major foundry Taiwan Semiconductor Manufacturing Co. (TSMC) closed down 2.4% on Thursday.
The drop mirrored losses among global peers overnight after reports the Biden administration had told allies it was considering tougher trade restrictions if companies such as Tokyo Electron and Netherlands-based ASML Holdings continued to give China access to advanced semiconductor technology.
The decline also comes as global technology stocks have recently slumped amid signs of a shift away from what have been the market's biggest drivers over the past year.The Bloomberg Asia Pacific Semiconductor Index is up more than 30% this year, despite falling about 5% this week.
“The broader impact on stock prices suggests this is more market sentiment than actual underlying concerns,” said Billy Leung, investment strategist at Global X Management, adding that any gradual tightening is unlikely to have a material impact given that trade restrictions remain an ongoing issue. “This could be an opportunity for investors to take profits in sectors that have outperformed significantly,” he said.
Still, news of the possible tougher restrictions comes amid growing geopolitical concerns, with pressure on TSMC mounting after President Donald Trump's recent comments to Bloomberg Businessweek questioning whether the U.S. has an obligation to defend Taiwan.
Meanwhile, TSMC reported better-than-expected profits for its latest quarter after the close on Thursday.Morgan Stanley analyst Charlie Chan wrote in an earlier note that on the company's earnings call, the key Nvidia supplier is likely to discuss its “geopolitical risk mitigation strategy.”
Nvidia supplier ASML saw its shares fall 11% in Amsterdam on Wednesday despite the strong orders. The Philadelphia Stock Exchange's Semiconductor Index fell nearly 7%, its biggest drop since March 2020.
ASML and Tokyo Electron have borne the brunt of the share price decline following news that the US is considering imposing so-called Foreign Direct Product Rules (FDPR), which would allow restrictions on foreign products that contain even a small amount of US technology. This comes amid urging from rival US semiconductor equipment makers who feel that export restrictions to China are unfairly hitting them.
Meanwhile, data released on Thursday showed Japan's exports of semiconductor manufacturing equipment (SPE) to China surged 84% in the first half of 2024 compared with the same period last year. The yen was about 11% weaker at the end of the first half of this year compared with the same period last year, likely helping to boost export values.
“We've been waiting for some time to tighten export controls on semiconductor precursors to China, given China's growing technological capabilities,” said Amir Anvarzadeh, a strategist at Asymmetric Advisors. “What's surprising is that the US is now resorting to the FDPR to get its allies to comply, when the Dutch and Japanese governments clearly haven't listened and companies like Applied Materials and Lam Research have complained about losing market share.”
–James Mayger and Brett Miller with assistance.
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