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,
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,
“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,
Until it can determine whether or not fabricating Biren designs violates U.S. restrictions, TSMC has halted all work on Biren products, according to Bloomberg, citing an unidentified person close to the matter. Nvidia shares closed up 1.1% at $125.99.
Chip stocks were also weighed down by a string of downgrades from Barclays analyst Blayne Curtis, who expects analog-chip stocks, which have served the auto and industrial markets and have outperformed the SOX index year to date, to start correcting.
“We still see material cuts in PC/Handsets/Memory, but those names are further along the reset process and we would begin to rotate out of the ones who have not even begun,” Curtis said in a note Monday.
Curtis downgraded both Analog Devices Inc. ADI,
For more: Early chip earnings provided a sigh of relief, but two more big tests are coming
“Texas Instruments should be a primary beneficiary of the Chips Act, and a more muted 2022 due to supply constraints should lead to a smaller EPS correction vs. peers,” the Barclays analyst said. Texas Instruments is scheduled to report earnings Tuesday after the close of markets, and its stock finished up 1.2% on Monday.
Curtis also downgraded Silicon Laboratories Inc. SLAB,
Hospitalizations are rising again in New York City with the spread of new COVID-19 subvariants that are better at evading immunity, along with flu and respiratory syncytial virus, or RSV.
Wallace Witkowski came to MarketWatch from the Associated Press in New York, where he covered the business of Big Pharma, after covering FDA regulation of many of the same companies, as well as medical devices, in the Washington, D.C., area. Based in San Francisco, his current focus is on the more exciting world of semiconductors, videogames and cybersecurity, when he’s not churning out earnings coverage. Follow him on Twitter at: @wmwitkowski.
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