Top Line
Shares in ASML, Europe’s most valuable technology company and a maker of some of the world’s most advanced semiconductor manufacturing equipment, fell more than 6% early Wednesday after reports that President Joe Biden may be considering tougher trade restrictions to further restrict China’s robust chip-making capabilities.
ASML shares fell sharply on Wednesday amid reports of further restrictions on sales to China.
Key Facts
According to Bloomberg, the Biden administration is floating the idea of using extremely strict export control measures known as Foreign Direct Product Rules (FDPR) as a way to restrict China’s access to advanced semiconductor manufacturing tools.
Under the FDPR regulations, the United States can impose export controls on goods made by foreign companies if the manufacture or operation of those goods contains technology of U.S. origin.
The move could severely restrict sales of products to China by companies such as Dutch company ASML and Japan’s Tokyo Electron.
Following the report, ASML’s European-listed shares fell 7.95 percent to $984 (900 euros) on Wednesday, while its Nasdaq shares fell nearly 8 percent to $983 in pre-market trading.
Tokyo Electron’s shares were hit hard, falling more than 7.4% to $213 (33,390 yen) on Wednesday.
Shares of other semiconductor giants including Nvidia, AMD and Intel also took a hit in premarket trading on Wednesday, falling 4.3%, 4.2% and 0.5%, respectively.
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Points to note
The US has reportedly urged Dutch and Japanese officials to restrict exports of advanced semiconductor manufacturing equipment to China, warning that failure to act could force the US into resorting to the FDPR rule. Bloomberg reports that this is in response to frustration from US semiconductor companies that they are being forced to comply with restrictions on doing business with China while foreign companies are not.
tangent
Shares of Taiwanese semiconductor giant TSMC, the world’s largest manufacturer of advanced semiconductors, fell more than 2.3% to $31.72 (NT$1,030) on Wednesday. The drop came after Bloomberg Businessweek reported that in an interview with President Trump, he expressed reluctance to defend Taiwan against potential Chinese aggression. President Trump said his reluctance was due in part to frustration over Taiwan’s semiconductor dominance. “Taiwan took our semiconductor business away from us… How stupid of us. They took all of our semiconductor business. They have a ton of wealth,” he told Bloomberg. He went on to note that if Taiwan wants U.S. protection, it should be willing to pay, saying, “I think we’re no different than an insurance policy.”
Main Background
Last year, the Dutch government announced new restrictions restricting ASML’s export of advanced chipmaking tools to certain countries for national security reasons. Although not explicitly stated, the restrictions were an effort to limit China’s access to the tools and were implemented following pressure from the U.S. government. In January, ASML said Dutch authorities had “partially revoked” a license to export some of its chipmaking systems to China.
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U.S. considers tougher trade restrictions as it cracks down on China’s semiconductor trade (Bloomberg)
Trump on taxes, tariffs, Jerome Powell and more (Bloomberg Businessweek)
