US sanctions drive Taiwan chip firm shares down by half

Shares of Taiwan- based chip designer Alchip Technologies have fallen by nearly half in the past few days since a major client, a supercomputer firm in the Chinese mainland, was put on the US Entity List over allegations that next- generation technology could serve military purposes.

The US’ crackdown on China’s rising hightech sector by cutting off chip technology has severely disrupted the semiconductor industry and supply chains, which in turn hurt businesses around the world, including those in the island of Taiwan, where the semiconductor sector acts as a pillar, expert noted.

The Taiwan- listed firm closed down by the 10- percent daily limit for five consecutive days ending on Thursday, losing about $ 460 million in terms of market capitalization.

The US Department of Commerce on April 8 blacklisted seven mainland entities involved in supercomputer programs, alleging that the firms’ activities are contrary to US national security or foreign policy interests.

The move barred US- based companies from exporting technology to the seven groups without proper approval.

Among the targeted firms, Tianjin Phytium Information Technology was the largest client for AIchip last year, contributing 39 percent of the latter’s related revenues.

If business with Phytium grinds to a halt, it will have a 25- percent impact on the chip designer’s revenues in 2021, Alchip’s legal representative said on Tuesday, according to media reports.

Alchip said it had stopped production of all products related to Phytium, adding that it was collecting “detailed documents for our US counsel to determine if the products are subject to EAR ( Export Administration Regulations)”.

But another chip firm from the island – Taiwan Semiconductor Manufacturing Co ( TSMC), the world’s largest contract chip manufacturer – has not suffered the same problems in the capital market as AIchip has, due to the former’s large scale of production for different clients.

TSMC’s shares have risen from NT$ 610 on April 7 to NT$ 619 as of Thursday’s close.

The South China Morning Post reported that TSMC has suspended new orders from Phytium. However, TSMC said that it could not confirm the report, and declined further comment.

Xiang Ligang, director- general of the Beijingbased Information Consumption Alliance, said that the US’ pressure on rising high- tech firms based in the Chinese mainland, most of which source chips from firms on the island, will hit the long- term development of the latter where the semiconductor sector plays a pillar role.