Shares of Asian Chipmakers Plummet After New US Rules

After the US announced tough new regulations to restrict sales of technology to China, shares in key Asian computer chipmakers plummeted, reported the BBC. Additionally, the US will not allow American companies to sell certain chips used in supercomputers and artificial intelligence to Chinese companies. Furthermore, the rules, which the government made public on Friday, also target purchases from foreign companies that use American-made machinery. On another note, as the world economy weakens, technology companies are also witnessing a decline in demand. For instance, on Tuesday, shares of Taiwanese chipmaker TSMC sank more than 8%, Tokyo Electron in Japan dropped 5.5%, and Samsung Electronics in South Korea dropped 1.4%. Additionally, the declines followed the reopening of the stock markets on Tuesday in Taiwan, Japan, and South Korea following their closure on Monday for public holidays. Plus, another of the largest Asian chipmakers, SMIC in China, saw a decline in shares by 4% in Hong Kong. Moreover, to provide Chinese chipmakers with machinery that can build more sophisticated chips, US companies must apply for a license under the new regulations. What's More According to Washington, the measures seek to stop Chinese military and technology advancements. Additionally, these regulations signal one of the most significant changes in US policy regarding technology exports to China in decades. Also, some of these rules will take effect immediately. Furthermore, BBC reported that "in the US on Monday, the technology-heavy Nasdaq index closed at its lowest level since July 2020 as shares in chipmakers Intel, Nvidia, Qualcomm, and Advanced Micro Devices fell." On the other hand, lower demand for electronic devices, including computers and cell phones, has recently hurt technology shares around the world. For instance, Samsung, a major South Korean technology company, issued a 32% profit decline warning on Friday. In addition, the largest smartphone manufacturer in the world reported lower profitability from its microprocessor manufacturing division as memory chip prices fell globally due to declining consumer electronics demand. Sonal Varma and Si Ying Toh, analysts at Nomura Research, stated that "The chip downturn suggests a deeper export decline lies ahead." They wrote in a note on Tuesday, "So far, export growth has already turned negative in September in India, but the evidence is growing that export growth across more Asian economies will turn negative in Q4."