Topline
Shares of ASML—Europe’s most valuable tech company and maker of the world’s most advanced chip-making machines—slumped more than 6% early Wednesday following reports that President Joe Biden may be mulling even harsher trade restrictions to further limit China’s ability to manufacture powerful semiconductors.
ASML stocks tanked on Wednesday amid reports of more curbs on sales to China.
Key Facts
According to Bloomberg, the Biden administration has floated the idea of using an extremely stringent export control measure, called the Foreign Direct Product Rule (FDPR), as a means to restrict China from accessing high-end chipmaking tools.
Under the FDPR rule, the U.S. can impose export controls on goods made by foreign companies if any U.S.-origin technology is in the production or operation of the item.
The measure could severely limit Dutch firm ASML and other companies like Japan’s Tokyo Electron from selling their products to China.
After the report, ASML’s European-listed shares were down 7.95% to $984 (€900) on Wednesday and its shares on NASDAQ tanked nearly 8% to $983 in pre-market trading.
Tokyo Electron’s shares were badly hit, slumping more than 7.4% on Wednesday to $213 (¥33,390).
Shares of other semiconductor giants like Nvidia, AMD and Intel have also taken a hit in pre-market trading on Wednesday, falling 4.3%, 4.2% and 0.5% respectively.
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What To Watch For
According to the report, the U.S. has urged Dutch and Japanese government officials to step up and place curbs on the export of advanced chip-making gear to China, warning the U.S. may have to turn to the FDPR rules if they don’t act. Bloomberg says this is in response to U.S. semiconductor companies being frustrated at having to adhere to restrictions on business with China while foreign firms don’t.
Tangent
Shares of Taiwanese chipmaking giant TSMC—the world’s largest maker of advanced chips—fell more than 2.3% to $31.72 (TWD 1,030) on Wednesday. The slump came after Bloomberg Businessweek published an interview with Trump in which he was unwilling to commit to defending Taiwan from potential Chinese aggression. Trump said his unwillingness is partly fueled by frustration over Taiwan’s semiconductor dominance. “Taiwan took our chip business from us…I mean, how stupid are we? They took all of our chip business. They’re immensely wealthy,” he told Bloomberg. He then noted that Taiwan should be willing to pay if it wants U.S. protection, saying: “I don’t think we’re any different from an insurance policy.”
Key Background
Last year, the Dutch government unveiled fresh controls limiting ASML’s ability to export advanced chip manufacturing tools to certain countries on national security grounds. Despite not explicitly mentioning it, the rules were an effort to curb China’s access to the tools and they came into being after pressure from the U.S. government. In January, ASML disclosed that Dutch officials had “partially revoked” the license for shipment of some of its chipmaking systems to China.
Further Reaidng
US Floats Tougher Trade Curbs in Chip Crackdown on China (Bloomberg)
Trump on Taxes, Tariffs, Jerome Powell and More (Bloomberg Businessweek)