Chip stocks fall further after Trump’s remarks on Taiwan defence | Stock markets

The stocks of some of the world’s largest chipmakers have fallen further after comments by Donald Trump that Taiwan, which is central to the global industry, should pay for its own defences against China.

Shares in semiconductor and related tech companies had already plunged on Wednesday after the former president’s comments, as well as a report that suggested Joe Biden’s administration was considering the strictest controls on the trade of chips to China.

Taiwan Semiconductor Manufacturing (TSMC), the world’s largest contract chipmaker, fell by 2.4% on Thursday. That followed a 7% fall the previous day, when Trump questioned why the US was acting as Taiwan’s “insurance” when, he claimed, it had taken away America’s chip business.

On Wednesday, the US’s tech-heavy Nasdaq composite index had its worst day since December 2022, falling 2.8%, after an unconfirmed Bloomberg report suggested Biden was considering introducing the most severe restrictions on companies if they continued to give China access to semiconductor technology.

It said the US president was considering whether to impose a measure called the foreign direct product rule, which would allow the US to impose controls on foreign-made products that use even tiny amounts of US technology.

That would have a particular impact on companies such as the Dutch chipmaker ASML and Japan’s Tokyo Electron, which some in the US government believe are giving China too much access to their advanced semiconductor technology.

Tokyo Electron shares fell by 8.8% on Thursday, while the Japanese precision tools maker Disco Corp sank by 8.8% and Lasertec, which makes equipment for inspecting for defects in computer chips, shed 6.3%.

Shares at ASML fell by a further 2% in the early hours of trading on Thursday, after an 11% plunge the previous day. The US chipmaker Nvidia was also caught up in the market slide, falling by 6% on Wednesday.

The comments by Trump, who is the favourite to win the US presidential race in November, indicate that military support for Taiwan in the event of action from China would not be guaranteed if he re-entered the White House.

Commenting on China’s aggression towards its neighbour, Trump said he “wouldn’t feel too secure” if he were Taiwan. He said the US was “no different than an insurance company”, suggested Taipei should be paying the US to defend it and claimed Taiwan “doesn’t give us anything”.

Taiwan produces more than 90% of the world’s most advanced chips, mostly through TSMC, and is a big supplier to Apple and Nvidia.

The country’s premier, Cho Jung-tai, said on Wednesday he was grateful to the US for its support, and that Taiwan was “working hard” to maintain the relationship while also increasing its self-defence capabilities.