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The Bellwether Semiconductor Manufacturing International Corp fell as much as 5.2% in Hong Kong on Monday, the most since 15 August. Declines were steeper in smaller stocks compared to a drop of 6.1% in the Philadelphia Semiconductor Index on 7 October after strong labour market data reinforced expectations for more aggressive interest rate hikes by the Federal Reserve.
Hua Hong Semiconductor plunged 10% in Hong Kong, while Shanghai Fudan Microelectronics Group plummeted 25%, the most in seven years. Will Semiconductor and Maxscend Microelectronics dropped more than 6% each in mainland trading.
US measures include restrictions on the export of some types of chips used in artificial intelligence and supercomputing, and also tighter rules on the sale of semiconductor equipment to any Chinese company. Separately, the US also added more Chinese firms to a list of companies that it regards as “unverified”, which means US suppliers will face new hurdles in selling technologies to those entities.
The curbs are a “big setback to China” and “bad news” for global semiconductors, Nomura Holdings analyst David Wong wrote in a note. China’s localisation efforts may also be “at risk as it may not be able to use advanced foundries in Taiwan and Korea”, he wrote.
The new US rules come at a time when the chip industry is already grappling with an ominous start to the earnings season and has gone from a worldwide shortage of chips to a glut in a matter of months due to the boom-and-bust nature of semiconductor demand.
Samsung Electronics, the world’s largest memory-chip maker, and PC-processor maker Advanced Micro Devices reported results last week that suggested a deeper-than-feared slowdown ahead.
Chinese Foreign Ministry spokesperson Mao Ning said on Saturday that the measures, which are set to enter into force this month, are unfair and will “also hurt the interests of US companies”. They “deal a blow to global industrial and supply chains and world economic recovery,” she said.
Among other stocks, Naura Technology Group plunged by the daily limit of 10% in mainland trading, while Advanced Micro-Fabrication Equipment and ACM Research Shanghai fell more than 16% each.
The US Commerce Department has added Beijing Naura Magnetoelectric Technology, a subsidiary of Naura in its Unverified List, the company said in a filing.
“It has been added to the UVL because it supplies equipment to AVIC International Holdings and so is considered having military business exposure,” Citigroup analysts including Jamie Wang wrote in a note, referring to Naura.
To be sure, the intensifying Sino-American tensions could spur Beijing to step up support for homegrown firms in a bid to achieve its goal of becoming an independent chip powerhouse.
“It is possible that these latest actions will stimulate efforts to build more trailing-edge logic manufacturing and trailing-edge WFE capability in China,” Jefferies Financial Group Inc. analysts including Edison Lee wrote in a note.
Chinese chip stocks may anchor the sector globally on Monday as markets of Japan, South Korea, Taiwan and Malaysia are closed.
Broader Chinese equity market also saw declines as it returned from the Golden Week holiday, hurt by a global equities sell off and bleak holiday-spending data that deepened concerns about an economic recovery. BM/DM
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