Chip stocks in the U.S. market experienced a significant decline during Wednesday’s morning trading session, following a Bloomberg report detailing discussions in the U.S. about imposing strict trade restrictions to reduce China’s access to advanced semiconductor technology.
Global chip stocks, including ASML, Nvidia, and TSMC, recorded notable decreases amidst reports of more rigorous export limitations from the U.S. and escalating geopolitical tensions fueled by statements from former U.S. President Donald Trump. ASML, listed in the Netherlands, saw an 11% drop, while Arm, AMD, Marvell, Qualcomm, and Broadcom all saw declines of over 5%, and Nvidia experienced a 6.3% decrease.
These developments followed Bloomberg’s report that the Biden administration is contemplating a broad regulatory measure to restrict companies from exporting crucial chipmaking equipment to China.
Reports suggest that the Biden administration has been discussing the potential utilization of the foreign direct product rule, which could impact companies like Japan’s Tokyo Electron and the Netherlands’ ASML Holding NV, both of which provide semiconductor equipment to Chinese chip manufacturers.
Tokyo Electron, Japan’s leading semiconductor equipment provider, experienced an 7.5% decline on Wednesday. Similarly, shares of Screen Holdings Co. closed down by 6.5%, Disco Corp. by 4.5%, and Advantest Corp. saw a decrease of up to 2.5%.
The Foreign Direct Product Rule (FDPR) in Washington empowers the U.S. to impose controls on foreign-manufactured goods, even if they contain minimal American technology, potentially impacting non-U.S. firms.
In an interview with Bloomberg Businessweek published on Tuesday, the former president suggested that Taiwan should compensate the U.S. for defense. He also alleged that Taiwan controlled a significant portion, approximately “100%,” of America’s semiconductor industry.
