[CHICAGO] Shares of chipmakers with US manufacturing plants fell on Friday (Apr 11) after China announced new tariffs, targeting semiconductor imports.
Beijing will raise tariffs on all US goods from 84 per cent to 125 per cent, and the China Semiconductor Industry Association issued an emergency notice, which stated that customs determines the origin of imports by where chips are manufactured, not the home country of origin.
The news put particular pressure on Texas Instruments (TI) and Intel, which have semiconductor plants located in the US. TI shares fell 6.8 per cent, while Intel sank 3.7 per cent and GlobalFoundries dropped 2.4 per cent.
“This is an incredibly uncertain time for chipmakers, and this is certainly not going to help,” said Wayne Kaufman, chief market analyst at Phoenix Financial Services. “Anything that hurts semis more than they’ve already been hit is bad for the general market.”
Analog Devices and Microchip Technology are also trading lower, along with Skyworks Solutions and Qorvo, with the latter two notable suppliers to Apple.
Baird analyst Tristan Gerra wrote that TI shares were “over-reacting” to the news, adding that “while TI’s share in China could erode somewhat, TI benefits from product performance, product breadth, cost structure, and customer service advantages which would be difficult for Chinese OEMs (original equipment manufacturers) to ignore all together”, a reference to original equipment manufacturers.
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The tariffs exclude companies that design chips but don’t manufacture them in the US, resulting in shares of some chipmakers to outperform on the day. Nvidia gained 2.2 per cent, while US-listed shares of Taiwan Semiconductor Manufacturing Co (TSMC) rose 3.3 per cent.
The tariffs will likely be “very good” for TSMC, and also act as a positive for Qualcomm and Advanced Micro Devices, said Jordan Klein, a tech-sector specialist at Mizuho Securities.
“All my feedback suggests US-China trade deal is all that matters right now for semi stocks and equity markets recovering,” Klein wrote in a note, with the emphasis included. “Very few I speak with believe a China deal will be struck anytime soon.”
He sees positioning in semis as “very light” given the uncertainty. BLOOMBERG
