Taipei-listed shares of Taiwan Semiconductor Manufacturing Company (TSMC) have lost more than $70 billion in market value this week amid concerns around the island’s security and a larger sell-off in chip stocks.
TSMC’s stocks fell for a third consecutive day on Friday, down 3.5% even as the world’s largest contract chipmaker posted strong earnings a day earlier.
While overnight losses on US markets weighed on the chip giant’s shares, larger fears around the threat to its home island Taiwan — which China views as its sovereign territory — have been a major worry for investors.
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TSMC’s shares had been on a roll until Tuesday — having hit a new all-time high of 1,080 Taiwanese dollars last week.
On Wednesday, however, comments published from US Republican presidential candidate Donald Trump — accusing Taiwan of stealing American chip business — triggered a sharp fall in the company’s shares. Trump also said Taiwan “should pay” the US for its defence.
TSMC’s shares ended the week 8.5% lower from its peak on Tuesday.
The firm’s American Depository Receipts (ADRs), meanwhile, fell nearly 8% on Wednesday erasing $77 billion in value. They did eke out a small gain on Thursday, however, closing up 0.4%, after having risen as much as 4% earlier in the day after its earnings call.
The Taiwanese foreign ministry also said on Thursday it was committed to boosting its defences and working with the United States.
‘Sacred mountain protecting Taiwan’
Taiwan is facing the rising threat of a Chinese invasion with Beijing’s repeated comments on ‘reunifying’ with the island and making increasingly aggressive military moves around it.
The US is bound by law to provide Taiwan with the means to defend itself, and has previously warned that a Chinese invasion of the island would wipe off up to $1 trillion per year from the world’s economy.
A key reason for that are TSMC’s extensive operations on the island, with the chipmaker manufacturing critical chips that are used in 90% of “almost every category of electronic device around the world.”
The chipmaker — Asia’s most valuable listed company — is colloquially referred to the “sacred mountain protecting the country” for its critical role in Taiwan’s export-dependent economy.
TSMC has repeatedly said it will keep the bulk of its manufacturing, as well as research and development, in Taiwan, but it is also investing $65 billion to build three factories in the US state of Arizona.
Jitters around the world
Seen as a chip industry bellwether, TSMC is also a major supplier for Apple and Nvidia.
Given the chipmaker’s massive significance to the global tech supply chain, Trump’s comments have weighed on chip stocks across the board.
The sell-off since Wednesday, worsened by a potential tightening of US chip curbs against China, has wiped off $900 billion off American tech stocks so far.
Chip stocks in Asia have been on edge too, losing nearly $100 billion on Thursday.
“We’re concerned about the plunges of the Nasdaq and chip stocks. It’s not just a short-term thing, which we see could consolidate downwards for [the] next two to three months,” said Allen Huang, a vice-president at Mega International Investment Services in Taipei.
“TSMC was dragged down by that trend and Trump’s comments, and its earnings did not exceed market expectations by much,” he added.
- Vishakha Saxena, with Reuters
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