Shares of key chip suppliers jump as U.S. reportedly considers toned-down China curbs

An ASML icon is being displayed on a circuit board, alongside the flags of the USA and China, in this photo illustration taken in Brussels, Belgium, on January 4, 2024.

Jonathan Raa | Nurphoto | Getty Images

Shares of key global semiconductor equipment firms jumped on Thursday after a report that the U.S. is considering sanctions on China’s chip industry that stop short of earlier proposals.

ASML was around 3.6% higher in early trade in Europe. Tokyo Electron was more than 6% higher in Japan where it trades.

Bloomberg reported on Wednesday that Washington is considering further measures to restrict sales of semiconductor equipment and AI memory chips to China, but that the new rules could stop short of earlier proposals that were seen as stricter.

The U.S. Commerce Department’s Bureau of Industry did not immediately respond to a request for comment on the Bloomberg report.

The U.S. is now considering adding fewer suppliers to Chinese technology giant Huawei to an export blacklist known as the Entity List. According to the report, one key Chinese firm that won’t be added is ChangXin Memory Technologies, a memory company and potential rival to the likes of SK Hynix and Samsung.

Analysts at Jefferies said ASML had previously guided toward a 30% decline in its revenue from China next year. The exclusion of that company could mean that ASML’s sales in China “decline by less than expected next year,” Jefferies said Thursday.

ASML has been caught in the crosshairs of the U.S. and China’s technology battle over semiconductors because of the Dutch firm’s critical position in the chip supply chain.

ASML produces a machine that chipmakers require to manufacture the most advanced semiconductors. Those machines have not yet been exported to China due to various export controls. More recently, the Dutch and U.S. governments have imposed restrictions that make it more difficult for ASML to export some of its less advanced machines to China.

The company sells its machines to “fabs” or plants that actually manufacture chips such as Taiwan’s TSMC as well as SMIC in China. Any rules that hit demand or directly target semiconductor manufacturers will have a negative impact on ASML.

The Bloomberg report suggested that further sanctions under consideration would target Chinese firms making semiconductor manufacturing equipment, rather than the factories that actually make the chips. This is also a positive for ASML and other foreign semiconductor equipment firms that sell to fabs.