On Tuesday, Semiconductor stocks fell across the globe, as tensions grew between Beijing and Washington over Nancy Pelosi’s visit to Taiwan, amid China’s threats of military action in response.
China has repeatedly warned against the visit, viewing it as a provocation by Washington. In the view of Beijing, Taiwan is a province of China, and the visit is viewed as an incursion on Chinese soil, and encouraging Taiwan’s assertion of independence.
Taiwan is a hub of semiconductor manufacturing, most notably hosting Taiwan Semiconductor Manufacturing Co Ltd (TSMC), and United Microelectronics Corp (UMC). TSMC declines 2.4% and UMC was down 3% as news of her visit spread.
Overall, Taiwanese stocks (.TWII) fell 1.6% – their biggest decline percentage-wise in three weeks. Chinese stocks also fell, dropping as geopolitical tensions and fears of military action rose.
Jack DeGan, chief investment officer at Harbor Advisory noted, “Chip stocks are really exposed to Asia. Some of them, especially chip equipment companies, have 70% of their sales in that region so it’s a big deal for them.”
The fears boiled over into chip stocks in the US, as shares of Nvidia Corp (NVDA), Intel Corp (INTC), Qualcomm (QCOM), and Micron Technology Inc (MU) all dropped from 0.7% to 1.9%. The Philadelphia Semiconductor index fell 1.1%.
In Europe, there was also an exodus, as Infineon (IFXGn.DE) fell 1%, and Dutch companies ASML (ASML.AS), ASMI (ASMI.AS) and BESI (BESI.AS) all declined from 2% to 3%.
Andrea Cicione, head of strategy at TS Lombard in London said, “The longer term impact is unlikely to be significant unless the situation escalates, which wouldn’t be my expectation right now.”
Not all stocks declined on the news of Pelosi’s visit. Xi’an Tian He Defense Technology Co (300397.SZ), a Chinese defense contractor saw its stock rise 20%.
