Chip Industry Reels as Trump’s Taiwan Remarks Spark Global Sell-Off
Market Reaction to Geopolitical Tensions
Semiconductor stocks experienced another day of significant losses following former US President Donald Trump’s controversial remarks about Taiwan’s defence and reports of potential stricter US controls on chip exports to China. The tech-heavy Nasdaq composite index suffered its worst single-day decline since December 2022, highlighting the far-reaching implications of these developments for the global semiconductor industry.
Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, saw its shares fall by 2.4% on Thursday, compounding a 7% drop from the previous day. This decline came in the wake of Trump’s statements questioning the United States’ role as Taiwan’s “insurance” provider, particularly given his claim that Taiwan had taken away America’s chip business.
Trump’s Comments and Taiwan’s Strategic Importance
Trump’s comments have raised concerns about the future of US-Taiwan relations and the potential impact on the global semiconductor supply chain. Taiwan is a crucial player in the industry, producing over 90% of the world’s most advanced chips, primarily through TSMC. The island nation is a major supplier to tech giants like Apple and Nvidia, making its stability and security a matter of global economic importance.
The former president’s remarks suggested that if he were to return to the White House, US military support for Taiwan in the event of Chinese aggression might not be guaranteed. Trump stated that he “wouldn’t feel too secure” if he were Taiwan and likened the US to an “insurance company,” implying that Taipei should be paying for its own defence.
In response to Trump’s comments, Taiwan’s Premier Cho Jung-tai expressed gratitude for US support and emphasised that Taiwan is working to maintain its relationship with the United States while also bolstering its self-defence capabilities.
Potential US Export Controls and Global Impact
Adding to the market turmoil, an unconfirmed Bloomberg report suggested that the Biden administration is considering implementing the most stringent controls yet on companies continuing to provide China with access to semiconductor technology. The potential measure, known as the foreign direct product rule, would allow the US to impose controls on foreign-made products that use even minimal amounts of US technology.
This potential policy shift has sent shockwaves through the global semiconductor industry, affecting not only US companies but also key players in Europe and Asia. Dutch company ASML, a leading manufacturer of chip-making equipment, saw its shares plummet by 11% on Wednesday, followed by a further 2% decline in early trading on Thursday.
Japanese firms were also caught in the downturn, with Tokyo Electron shares falling 8.8%, while precision tools maker Disco Corp and chip inspection equipment manufacturer Lasertec saw declines of 8.8% and 6.3%, respectively.
Broader Implications for US-China Tech Competition
The potential implementation of stricter export controls is seen as part of a broader US strategy to maintain its technological edge over China, particularly in critical sectors like semiconductors. However, industry analysts warn that such measures could have unintended consequences, potentially disrupting global supply chains and innovation in the tech sector.
As the semiconductor industry grapples with these geopolitical and regulatory challenges, investors and industry leaders are closely monitoring developments in US-China relations and their potential impact on the global tech landscape. The coming months are likely to be crucial in determining the future direction of the semiconductor industry and its role in the ongoing technological competition between major world powers.
