The Ratings Game: TSMC’s stock slumps after reported diss of U.S. chip efforts; industry downgrades also weigh on sector

by | Oct 24, 2022 | Stock Market

Chip stocks lagged behind the broader market Monday following one report that Taiwan Semiconductor Manufacturing Co. is pessimistic about U.S. efforts to build domestic capacity, and another that said the third-party chip fabricator stopped work with a Chinese customer until it can determine if the products violate U.S. restrictions.

U.S. shares of TSMC
TSM,
-3.86%,
which had fallen as much as 6% in regular trading, closed down 3.9% at $61.29 on Monday following a Financial Times report that TSMC believes U.S. efforts to rebuild its domestic fab industry are “doomed to fail.” TSMC is the largest-cap component out of 30 in the PHLX Semiconductor Index
SOX,
+0.64%,
which fell nearly 2% at one point before rebounding Monday, finishing up 0.6%, compared with a 1.2% gain by the S&P 500 index
SPX,
+1.19%.
Morris Chang, TSMC’s founder, said that to House Speaker Nancy Pelosi in stark terms during her visit to Taiwan back in August, according to the FT report, at a meeting where Mark Liu, the company’s chairman, and Taiwanese President Tsai Ing-wen were in attendance. Chang was referring to the $52 billion in funding from the U.S. CHIPS Act that Congress passed to spur U.S. fab capacity, with Intel Corp.
INTC,
+0.78%,
Texas Instruments Inc.
TXN,
+1.21%,
and Micron Technology Inc.
MU,
+0.34%
among the main companies believed to benefit. “He was pretty blunt, and the esteemed guests were a bit surprised,” the FT reported, according to an unidentified source who heard Chang speaking to Pelosi. The point of the funding is to strategically lessen U.S. reliance on Taiwan, where the majority of the world’s fab capacity is located. Should China ever invade Taiwan, which President Joe Biden has pledged the U.S. would help defend, every industry that relies on a microchip to manufacture a product would effectively be crippled by the disruption. Meanwhile, the U.S. recently widened its restrictions on advanced tech sales to China to curb the world’s second-largest economy’s military ambitions. Read: Chip stocks crushed to two-year low as more tech, AI ban to China add to woes Another report, this one from Bloomberg, suggested that TSMC is also in a sticky situation when it comes to making chips designed by China startup Biren, which claims its BR100 data-center graphics-processing unit can take on Nvidia Corp.’s
NVDA,
+1.07%
A100. Nvidia recently said that widened restrictions on China would potentially cost it about $400 million in lost third-quarter sal …

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