Global chip stocks fell sharply following comments from former U.S. President Donald Trump on Taiwan.
- Global chip stocks fell sharply with ASML, Nvidia and TSMC hit amid reports of tighter export restrictions from the U.S. and a ramping up of geopolitical tensions.
- Bloomberg reported Wednesday that the Biden administration is considering using a wide-sweeping rule to clamp down on companies exporting their critical chipmaking equipment to China.
- Donald Trump said Taiwan should pay the U.S. for defense, in an interview with Bloomberg Businessweek published Tuesday.
Global chip stocks fell sharply, with ASML, Nvidia and TSMC posting declines amid reports of tighter export restrictions from the U.S. and a ramp-up of geopolitical tensions fueled by comments from former U.S. President Donald Trump.
ASML’s Netherlands-listed shares were down 11%, while Tokyo Electronshares in Japan closed nearly 7.5% lower. Arm, AMD, Marvell, Qualcomm and Broadcom closed down more than 7%.
The moves came after Bloomberg on Wednesday reported that the Biden administration is considering a wide-sweeping rule to clamp down on companies exporting their critical chipmaking equipment to China.
Washington’s foreign direct product rule, or FDPR, allows the U.S. to put controls on foreign-made products even if they use the smallest amount of American technology. This can affect non-U.S. companies.
CNBC has reached out to the U.S. State Department, the Bureau of Industry and Security, and the Office of the U.S. Trade Representative for comment on the report.
ASML’s stock drop came even as it reported earnings that beat market expectations for the second quarter. However, 49% of its sales over the period took place in China — highlighting how much is at risk for the firm, in the event of tighter restrictions. ASML makes the machines that are required to manufacture the most advanced chips in the world.
Comments from Trump, a Republican, added further negative sentiment to semiconductor stocks.
The former president said Taiwan should pay the U.S. for defense, in an interview with Bloomberg Businessweek published Tuesday. He also claimed Taiwan took “about 100%” of America’s semiconductor business.
The remarks have thrown doubt over the U.S. commitment to defend Taiwan if Trump becomes president and in the event of an attack by China, which sees the democratically governed island as part of its territory.
The Taiwan-listed shares of Taiwan Semiconductor Manufacturing Co. closed down 2.4% on Wednesday.
The geopolitical tensions also weighed on chip stocks in the U.S. The VanEck Semiconductor ETF closed down over 7%. Super Micro Computerand Applied Materials were among the other U.S.-listed laggards in trading.
Fear of depression
While chip stocks took the brunt of the pain on Wednesday, investors need to recognize that the entire global economy — not just chips — could crumble if Taiwan’s security situation deteriorates significantly.
The worries escalated Wednesday after Trump declined to provide assurances that the U.S. would protect Taiwan against Chinese aggression if he’s elected president.
“They did take about 100% of our chip business,” Trump told Bloomberg Businessweek in an interview published on Tuesday. “Taiwan should pay us for defense.”
“They did take about 100% of our chip business,” Trump told Bloomberg Businessweek in an interview published on Tuesday. “Taiwan should pay us for defense.”
“I wouldn’t feel so secure right now if I were them,” he added.
China regards Taiwan as a breakaway province that it intends to unify with the mainland. Its leadership could interpret Trump’s statements to mean the U.S. wouldn’t be resolute in providing support to Taiwan, thus lowering the level of deterrence against an invasion or blockade of the island.
t’s hard to overstate Taiwan’s importance to the supply chain. About 90% of the world’s most advanced chips, including the main processors inside mobile phones, AI GPUs, and PCs, are made in Taiwan by TSMC. Other TSMC manufactured chips are required ingredients in household appliances, automobiles, data center servers, and defense systems.
A military conflict over Taiwan could shut down all of TSMC’s factories given that they require service and parts from Western suppliers to maintain production.
If the U.S. lost access to Taiwan’s chip-making capacity, consumers wouldn’t struggle to purchase electronics and other products essential for modern living. Corporate computer systems would falter without replacement parts. Overall, the disruptions would be far worse than what we saw from chip shortages during the peak of Covid.
There’s no way to know if Trump’s latest comments are political bluster or the framework of future policy. But risking a full blown depression, no matter how small the probability, is something every executive, every investor, and every American needs to be thinking about right now.
CNBC /YL
Leave a Reply
You must be logged in to post a comment.