Semiconductor stocks under pressure as tensions rise in Taiwan

Semiconductor chips are seen on a computer circuit board in this illustration picture taken February 25, 2022. REUTERS/Florence Lo/Illustration

Global semiconductor stocks fell on Tuesday as an expected visit by US House Speaker Nancy Pelosi to Taiwan, which China claims as its territory, sparked a fresh escalation of tensions between Washington and Beijing.

China sees the visit by Pelosi, second in line for the US presidency and a long-time critic of China, as sending an encouraging signal to the pro-independence camp in Taiwan and has repeatedly warned against it.

Taiwan is home to the world’s largest contract semiconductor manufacturer, Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW). The company’s shares closed down 2.4 percent, while peer United Microelectronics Corp ( UMC ) ( 2303.TW ) fell 3 percent. read more

Shares in Taiwan (.TWII) fell 1.6 percent, their biggest percentage drop in three weeks, while shares in China posted their biggest drop in more than two months as rising tensions rattled Asian financial markets .

“The outlook for trade in Asia is likely to weigh on semiconductors given how much global production comes from Taiwan,” said Michael Hewson, chief market analyst at CMC Markets UK.

Semiconductor stocks globally felt the heat. Germany’s Infineon ( IFXGn.DE ) fell 2.3 percent, while Dutch companies ASML ( ASML.AS ), ASMI ( ASMI.AS ) and BESI ( BESI.AS ) fell between 3 percent and 4 percent.

U.S. chip stocks including Nvidia Corp ( NVDA.O ), Intel Corp ( INTC.O ), Qualcomm ( QCOM.O ) and Micron Technology Inc ( MU.O ) each fell more than 1 percent in trading before the bell.

“This market reaction is expected after the strong performance of equity markets in July,” said Andrea Cicione, chief strategist at TS Lombard in London.

“The long-term impact is unlikely to be significant unless the situation escalates, which would not be my expectation at this time.”

Pelosi was due to visit the island on Tuesday, three sources said, as several Chinese warplanes flew near the median line dividing the Taiwan Strait, a source told Reuters. read more

Reporting by Bansari Mayur Kamdar and Medha Singh in Bengaluru. Editor: Shinjini Ganguly

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