(Bloomberg) – Chinese semiconductor stocks tumbled after new U.S. restrictions on China’s access to U.S. technology added to a disappointing start to the earnings season, fueling fears that the slowdown in industry is far from over.
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Bellwether Semiconductor Manufacturing International Corp. fell 5.2% in Hong Kong on Monday, the most since Aug. 15. That compares with a 6.1% drop in the Philadelphia Semiconductor Index on Oct. 7, the biggest drop in nearly a month after strong labor market data bolstered expectations for more aggressive interest rate hikes by the Federal Reserve.
Hua Hong Semiconductor Ltd. fell 9.3% in Hong Kong, while Shanghai Fudan Microelectronics Group Co. fell 19%. Will Semiconductor Co. lost as much as 6.7% in Mainland trading.
The US measures include export restrictions on certain types of chips used in artificial intelligence and supercomputing, as well as stricter rules on the sale of semiconductor equipment to any Chinese company. Separately, the United States has also added more Chinese companies to a list of companies it considers “unverified”, which means that American suppliers will face new obstacles to selling technologies to these entities. .
The restrictions are a “big setback for China” and “bad news” for global semiconductors, Nomura Holdings Inc. analyst David Wong wrote in a note. China’s localization efforts could also be “at risk as it may not be able to use advanced smelters in Taiwan and Korea”, he wrote.
Chinese Foreign Ministry spokesman Mao Ning said on Saturday that the measures, which are due to take effect this month, are unfair and “will also harm the interests of American businesses”. They are “dealing a blow to global industrial and supply chains and to global economic recovery”, she said.
Smaller chip-related stocks saw larger declines than their larger counterparts. Naura Technology Group Co. plunged as much as 10% in mainland trading, while Advanced Micro-Fabrication Equipment Inc. and ACM Research Shanghai Inc. fell more than 15% each.
To be sure, heightened Sino-US tensions could prompt Beijing to bolster its support for local businesses in a bid to achieve its goal of becoming an independent chip powerhouse.
“It is possible that these latest actions will spur efforts to build more advanced logic manufacturing and advanced WFE capabilities in China,” Jefferies Financial Group Inc. analysts, including Edison Lee, wrote in a note. .
The new US rules come at a time when the chip industry is already grappling with a worrying start to earnings season. Samsung Electronics Co., the world’s largest memory chip maker, and PC processor maker Advanced Micro Devices Inc. announced results last week suggesting a deeper-than-expected downturn.
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Chinese stocks could anchor the sector globally on Monday as markets in Japan, South Korea, Taiwan and Malaysia are closed.
(Updates with Nomura, comments from Jefferies and a graphic.)
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