Trump, Biden reports rock chip sector
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Annelise Capossela/Axios
Geopolitical tensions between the U.S. and China are gripping the chip sector at a time when demand has never been higher.
Why it matters: Uncertainty around U.S. policy puts enormous pressure on an industry already strained by labor and capacity — but one that is critical to nearly all areas of the economy, as well as for national defense.
Driving the news: Former President Trump chided Taiwan in a Bloomberg interview published Tuesday for taking away U.S. chip manufacturing and using the U.S. as an "insurance policy" against China.
- "Taiwan should pay us for defense. … Taiwan doesn't give us anything," he said.
- Overnight, a separate Bloomberg report suggested that the Biden administration is considering putting into place severe U.S. trade restrictions on advanced chip technology to China that could be imposed on several foreign-made products that use even small amounts of American technologies.
Zoom in: The current administration, facing pressure from domestic companies that feel disadvantaged by existing U.S. trade restrictions, is attempting to sway allies to limit their own companies from continuing to supply advanced semiconductor technology to China.
- The goal is to limit those companies' ability to maintain and repair restricted equipment already in the country, which U.S. corporations are already barred from doing, Bloomberg noted.
The big picture: "Governments around the world view this as an industry of strategic importance," David Isaacs, vice president of government affairs at the Semiconductor Industry Association, said in D.C. recently on an Amazon AWS Summit panel moderated by Axios.
- "The U.S. and the world [are] reliant — 92% — on leading edge chips from the island of Taiwan and the remaining 8% from South Korea," he noted.
- "You don't need to be a geopolitical genius, or risk analyst, to recognize that that is dangerous and a problem waiting to happen."
State of play: While AI development has driven recent demand for chip production, there's been little to no expansion on the supply side to support growing appetites.
- For example, Netherlands-based ASML remains the only company in the world that makes a specific kind of machine that carves circuits onto the most advanced chips.
- And Taiwan Semiconductor Manufacturing (TSMC) remains the primary manufacturer for chips designed by the likes of Nvidia, AMD and Apple and it's only recently started to open factories outside of Taiwan.
The intrigue: While shares of semiconductor companies (named above) plunged on Wednesday, alongside some Big Tech names including Meta and Apple, Jim Lebenthal of Cerity Partners speculated on CNBC today that the moves have more to do with investors using the news as an excuse to take profits.
- "That's completely reasonable. However, I see very large gains ahead for a lot of these names," he said.
What we're watching: ASML shares fell more than 12.7% Wednesday despite issuing better than expected bookings for its machines in its last quarter.
- TSMC, which closed down about 8%, is scheduled to release its latest earnings report Thursday morning.
- The tech-heavy Nasdaq closed down 2.8% to its worst level since December 2022.
