Semiconductor stocks fell sharply yesterday as an expected visit by US House of Representatives Speaker Nancy Pelosi to Taiwan fuelled a fresh escalation in tensions between Washington and Beijing.
China views the visit by Ms Pelosi, a long-time critic of Beijing, as sending an encouraging signal to the pro-independence camp in Taiwan and has repeatedly warned against it.
China views Taiwan as a renegade province. The US has a ‘one China policy’ that recognises Beijing but it provides military support to Taiwan.
Taiwan is home to the world’s biggest contract manufacturer of semiconductors, Taiwan Semiconductor Manufacturing and peer United Microelectronics. Shares of the companies fell 2.4pc and 3pc, respectively.
Taiwanese stocks dropped 1.6pc, marking their biggest percentage decline in three weeks, while Chinese stocks posted their biggest fall in more than two months on mounting geopolitical tensions.
“Chip stocks are really exposed to Asia. Some of them, especially chip equipment companies, have 70pc of their sales in that region so it’s a big deal for them,” said Jack DeGan, chief investment officer at Harbor Advisory.
US chip stocks including Nvidia, Intel, Qualcomm and Micron Technology fell between 0.7pc and 1.9pc.
The Philadelphia SE Semiconductor index shed 1.1pc.
In Europe, Infineon declined 1pc, while Dutch firms ASML, ASMI and BESI fell between 2pc and 3pc.
“The longer term impact is unlikely to be significant unless the situation escalates, which wouldn’t be my expectation right now,” said Andrea Cicione, head of strategy at TS Lombard in London.
Chinese warplanes were reportedly buzzing the line dividing the Taiwan Strait shortly before the expected arrival of Ms Pelosi.
Shares of Xi’an Tian He Defense Technology, a Chinese defence equipment manufacturer, jumped 20pc, bucking the weaker trend.