DailyPost 2207

The chip, chipmaker and its user story does not seem to end. The story shot into prominence during the pandemic but does not seem to die down at all. There is something or the other in the international headlines related to the chip situation on a regular basis. Pandemic, supply chain breakdown, desperate attempt to enhance national chip fab capabilities and finally recession. This roller coaster will not die down. And now the industry is being hit by sweeping US curbs on companies that conduct technology business with China. It sent the stock markets in a tizzy. No one really knows what direction will this industry finally take.

One headline blares, ”Chipmaker rout engulfs TSMC, Samsung with $240 billion wiped out.” It makes you think why one of the most sought after high precision tech product is facing such a plight? The tumbling to Asia’s top tech stocks has been the backdrop of an escalating US-China tech race that has literally erased more than $240 billion from the sector’s global market value. The world’s most reputed, largest and most high-tech chipmaker plunged a record 8.3%. Other chipmakers like Samsung and Tokyo Electron Ltd also declined.

The harsh terms imposed on companies are yielding desired results. It has erected barriers to entry to China market by limiting the ability of the US companies to sell equipment and tech to their Chinese counterparts. There is also a growing fear that if US widens its initiative to include other countries, the fallout can be much worse. The final universe of restrictions is still a matter concern and so is the final fallout. There is a general acceptance that US can bounce back in chip fab and some positive signs can already be seen. But given the current spate of restrictions and its multifarious impact, there is a very little chance that any chipmaker will remain unimpacted.

Thus the US chip stocks were on the track to decline for a third consecutive day. The famed chipmakers Nvidia Corp., Advanced Micro Devices Inc., Qualcomm Inc. and Texas Instruments Inc. all were down more than 1%. There were even worse off news; chip tool maker ASML Holding NV traded down 2.3% in Amsterdam, bringing three day losses to more than 11%. The US restrictions have been imposed to make a killer impact on this China centric industry. These include restrictions of export of some types of chips used in artificial intelligence and also a much tighter regime on the sale of semiconductor equipment to any Chinese company. The is the beginning of the First Chip War.

Sanjay Sahay

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