Chipmakers Hit Hard by China’s New Tariffs
Shares of Chipmakers with US Manufacturing Plants Fall
[CHICAGO] Shares of chipmakers with US manufacturing plants fell on Friday (Apr 11) after China announced new tariffs, targeting semiconductor imports.
China’s Tariffs Aim for Semiconductor Imports
Beijing will raise tariffs on all US goods from 84 per cent to 125 per cent, and the China Semiconductor Industry Association issued an emergency notice, which stated that customs determines the origin of imports by where chips are manufactured, not the home country of origin.
Texas Instruments and Intel Suffer
The news put particular pressure on Texas Instruments (TI) and Intel, which have semiconductor plants located in the US. TI shares fell 6.8 per cent, while Intel sank 3.7 per cent and GlobalFoundries dropped 2.4 per cent.
Industry Analyst Weighs In
"This is an incredibly uncertain time for chipmakers, and this is certainly not going to help," said Wayne Kaufman, chief market analyst at Phoenix Financial Services. "Anything that hurts semis more than they’ve already been hit is bad for the general market."
Other Chipmakers Also Impacted
Analog Devices and Microchip Technology are also trading lower, along with Skyworks Solutions and Qorvo, with the latter two notable suppliers to Apple.
Analyst Opinion
Baird analyst Tristan Gerra wrote that TI shares were "over-reacting" to the news, adding that "while TI’s share in China could erode somewhat, TI benefits from product performance, product breadth, cost structure, and customer service advantages which would be difficult for Chinese OEMs (original equipment manufacturers) to ignore all together".
Tariffs Exclude Chip Designers
The tariffs exclude companies that design chips but don’t manufacture them in the US, resulting in shares of some chipmakers to outperform on the day. Nvidia gained 2.2 per cent, while US-listed shares of Taiwan Semiconductor Manufacturing Co (TSMC) rose 3.3 per cent.
Conclusion
The Chinese tariffs have sent shockwaves through the chipmaking industry, resulting in significant losses for companies with US manufacturing plants. The uncertainty surrounding the trade deal between the US and China is likely to continue, and investors will need to remain vigilant as the situation develops.
FAQs
Q: What are the new tariffs announced by China?
A: China will raise tariffs on all US goods from 84 per cent to 125 per cent.
Q: Which chipmakers were most affected by the news?
A: Texas Instruments, Intel, Analog Devices, Microchip Technology, Skyworks Solutions, and Qorvo were among the companies most affected by the news.
Q: Why did Nvidia and TSMC shares rise despite the tariffs?
A: The tariffs exclude companies that design chips but don’t manufacture them in the US, making Nvidia and TSMC shares rise.
Q: What is the current state of the trade deal between the US and China?
A: The trade deal between the US and China remains uncertain, with many analysts predicting that a deal will not be struck anytime soon.
