Semis Slide on Report U.S. May Scrap Taiwan Waivers

• The U.S. semiconductor sector, including TSM, NVIDIA (NVDA) and Broadcom (AVGO), declined during Friday’s session, after a WSJ report indicated the U.S. Commerce Department may revoke waivers allowing chipmakers to export U.S. technology to China.
• Proposed restrictions, discussed with Samsung Electronics (SSNLF), SK Hynix, and TSMC, aim to curb access to the $50 billion Chinese AI chip market, with NVIDIA reporting an $8 billion sales loss due to prior export controls.
• Amid a fragile U.S.-China trade truce, the potential waiver cancellations could disrupt global supply chains, prompting concerns about increased costs and accelerated efforts to reshore semiconductor production.

U.S. semiconductor stocks tumbled Friday after a Wall Street Journal report revealed that the Commerce Department is weighing the revocation of waivers permitting certain chipmakers to export American technology to their factories in China, citing national security concerns. According to the WSJ, Commerce Department official Jeffrey Kessler informed Samsung Electronics Co., Ltd. (SSNLF), SK Hynix, and Taiwan Semiconductor Manufacturing Company (TSMC) (TSM) of plans to cancel these waivers, which have enabled the companies to utilize U.S. chipmaking technology in their Chinese facilities without case-by-case licenses. The news triggered a market reaction, with the VanEck Semiconductor ETF dropping approximately 1%, while individual stocks saw declines: TSMC fell 1.86% to $209.54, NVIDIA Corporation (NVDA) dropped 1.12% to $143.85, Broadcom Inc. (AVGO) declined 0.90% to $248.42, Qualcomm Inc. (QCOM) fell 1.13% to $151.90, and Texas Instruments Inc. (TXN) dipped 0.25% to $197.86.

The potential termination of these waivers reflects escalating U.S.-China tensions over technology trade, particularly in the semiconductor sector, which is critical for artificial intelligence and advanced computing applications. The U.S. has implemented stringent export controls over recent years to limit China’s access to cutting-edge AI chips, citing risks to national security. These restrictions have significantly impacted U.S. chipmakers, with NVIDIA reporting an $8 billion sales hit due to curbs on its China-bound H20 chips, as disclosed in its earnings report last month. NVIDIA CEO Jensen Huang emphasized the severity of the restrictions, noting on an earnings call that the $50 billion Chinese AI chip market is “effectively closed to U.S. industry,” a sentiment he reiterated in a May CNBC interview, describing the market loss as “tremendous.”

The Commerce Department’s latest move comes amid a fragile U.S.-China trade truce, with both nations agreeing to a second trade framework in London days ago, following a tariff pause in May that was disrupted by subsequent U.S. chip export changes. China labeled these measures “discriminatory,” highlighting ongoing friction in bilateral trade relations. The proposed waiver cancellations would affect major players like TSMC, Samsung, and SK Hynix, which rely on U.S. technology to produce chips in China, a key manufacturing hub. TSMC, for instance, operates advanced facilities in China, and any disruption could ripple through global supply chains, given its role as the world’s leading contract chipmaker. Similarly, Samsung and SK Hynix, major players in memory and logic chips, face potential operational challenges if forced to seek individual licenses or relocate production.

The semiconductor industry is navigating a complex landscape shaped by geopolitical strategies and domestic policy shifts. The U.S. CHIPS and Science Act of 2022 has spurred significant investments in domestic manufacturing, with TSMC committing over $165 billion to Arizona-based facilities and Samsung investing $17 billion in a Texas plant. However, these efforts to bolster U.S. production capacity are offset by the reliance of global chipmakers on Chinese facilities, which account for a significant portion of their output. The potential revocation of waivers could accelerate the reshoring of semiconductor production but risks short-term supply chain disruptions and increased costs for companies and consumers.

The market’s reaction reflects investor concerns about the broader implications of tightened export controls, which could further strain U.S.-China trade relations and impact the profitability of semiconductor firms. As the U.S. continues to prioritize technological sovereignty, the industry faces a pivotal moment, balancing innovation, global competitiveness, and geopolitical pressures.

WallStreetPit does not provide investment advice. All rights reserved.

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