TSMC, Tokyo Electron lead Asian tech sell-off on trade concerns

(Bloomberg) — Asian technology shares fell for a second day on concerns about the risk of tougher U.S. restrictions on semiconductor sales to China.

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Shares of Japanese chipmaker Tokyo Electron fell 11%, on track for their worst two-day loss since 2015. Shares of Korean memory maker Samsung Electronics Co. fell 3.3%, while leading Taiwan Semiconductor Manufacturing Co. closed down 2.4% on Thursday.

The declines mirrored overnight losses at similar companies globally after news that the Biden administration had told allies it was considering tougher trade restrictions if companies such as Tokyo Electron and Netherlands-based ASML Holding NV continued to give China access to advanced chip technology.

The losses also follow a recent weak performance by global technology stocks amid signs they are moving away from the biggest market movers over the past year. The Bloomberg Asia-Pacific Semiconductor Index is still up more than 30% this year even as it fell about 5% this week.

“The broad impact on the stock price suggests this is more about market sentiment than real fundamental concerns,” said Billy Leung, investment strategist at GlobalX Management, adding that the gradual tightening should not have a material impact given that trade restrictions have been an ongoing issue. “This could be an opportunity for investors to profit in a sector that has been significantly outperforming,” he said.

However, news of tighter restrictions comes amid growing geopolitical concerns. Donald Trump’s recent comments to Bloomberg Businessweek questioning whether the United States has a duty to defend Taiwan have added to the pressure on Taiwan’s chipmaker.

Separately, TSMC reported better-than-expected fourth-quarter earnings after the market closed Thursday. In its earnings briefing, the major supplier to Nvidia Corp. is likely to include a discussion of its “strategy to mitigate geopolitical risks,” Morgan Stanley analyst Charlie Chan wrote in an earlier note.

Shares of ASML, a supplier to Nvidia, fell 11% in Amsterdam on Wednesday, even after it reported strong orders. The Philadelphia Semiconductor Index fell about 7%, its highest level since March 2020.

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ASML and Tokyo Electron bore the brunt of the declines on news that the US is considering imposing the so-called foreign direct product rule (FDPR), which would allow controls on products made abroad that use any amount of US technology. This comes amid a push by rival US chipmakers who feel that restrictions on exports to China have unfairly hurt them.

Meanwhile, data released Thursday showed Japan’s exports of semiconductor production equipment to China surged 84% in the first half of 2024 from a year earlier. The yen fell about 11% at the end of the first half of this year from the same period last year, likely helping boost the value of exports.

“We’ve been waiting for China to impose stricter SPE export restrictions for a while,” given the Asian nation’s technological advancements, said Amir Anvarzadeh, a strategist at Asymmetric Advisors Pte. “The surprise is that the U.S. is looking to the FDPR to get its allies to comply, as the Dutch and Japanese governments clearly aren’t listening, and companies like Applied Materials Inc. and Lam Research Corp. have been complaining that they’re losing market share.”

–With assistance from James Major and Brett Miller.

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