Asian chip stocks fall on news that U.S. may consider trade restrictions

Shares of Taiwan Semiconductor Manufacturing Company, the world’s largest chip supplier, fell as much as 4.3% during the trading day.
Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group, said there are still buying opportunities for long-term investors.
The Biden administration may be considering cracking down on companies exporting their critical chip-making equipment to China, further stoking tensions between the two superpowers, according to a Bloomberg report on Wednesday.

Asian chip stocks fell Thursday after technology stocks fell on Wall Street amid reports the United States may consider tougher export restrictions.

Shares of Taiwan Semiconductor Manufacturing Company, the world’s largest chip supplier, fell 4.3% in Asian trading before paring losses. The company said Thursday that its second-quarter revenue and profit forecast came in better than expected.

TSMC suppliers were also hit, with Japanese machinery company Tokyo Electron falling nearly 9% while Screen Holdings fell more than 8%.

Other chip-related stocks, such as lithography materials supplier Tokyo Ohka Kogyo and industrial water company Organo, also fell, 4.53% and 3.13%, respectively.

The Biden administration may be considering cracking down on companies exporting their critical chip-making equipment to China, further stoking tensions between the two superpowers, according to a Bloomberg report on Wednesday.

“Chip makers are the darlings of the market. Digitalization is affecting almost everything we touch. Any form of tariffs or trade restrictions will have an impact on these chip makers. We see this all over the world,” said Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group.

South Korean chip stocks were not spared. Samsung Electronics fell nearly 2%, while SK Hynix fell nearly 5% and SK Square fell nearly 10%.

But Yoshioka said buying opportunities remain for long-term investors.

“The market moves a lot based on sentiment and headlines, especially in the short term. In the long term, you really need to focus on the promise of artificial intelligence and what it can actually do for many businesses and consumers,” she told CNBC’s “Street Signs Asia.”

“Political hurdles can certainly create a catalyst for a negative decline in markets, earnings can also be another catalyst as expectations are high heading into earnings season… This can potentially create some negative pressure on some stocks in the short term,” Yoshioka explained.

The Foreign Direct Products Rule, or FDPR, allows the United States to impose controls on products made abroad even if they use very little American technology, which can hamper non-U.S. companies.

The ripple effect on Asian tech stocks came after sharp declines on Wall Street in ASML and Nvidia, which posted losses of 12% and 7% respectively.

ASML Holdings, which makes machines that create the world’s most advanced chips, closed down more than 12% despite better-than-expected second-quarter profit.

Arm, AMD, Marvell, Qualcomm and Broadcom ended the trading day down more than 7%.

Meanwhile, Republican presidential candidate Donald Trump told Bloomberg Businessweek on Wednesday that Taiwan should fund U.S. defense. He also criticized Taiwan for taking “about 100 percent” of the U.S. chip market.

—CNBC’s Arjun Kharpal contributed to this report.