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TSMC underperforms main board amid concerns over shipments to Huawei

2019/05/21 16:44:31

Taipei, May 21 (CNA) Shares of Taiwan Semiconductor Manufacturing Co. (TSMC) dropped Tuesday, underperforming the broader market, amid concerns over the company's supply to Chinese telecom equipment supplier Huawei Technologies Co., which is facing a ban on its products in the United States, dealers said.

Selling in TSMC, the world's largest contract chipmaker, led the local semiconductor sector in a fall as investors here took cues from a 4.02 percent plunge of the Philadelphia Semiconductor Index on the U.S. markets overnight, dealers said.

Shares of TSMC, the most heavily weighted stock on the local market, dropped 1.68 percent to close at NT$234.00 (US$7.45), with 79.96 million shares changing hands.

The weighted index on the Taiwan Stock Exchange (Taiex), meanwhile, ended up 0.64 percent at 10,464.50.

Led by TSMC, the bellwether electronics sector lost 0.18 percent and the semiconductor sub-index shed 1.29 percent. Among Huawei's other IC suppliers, IC packaging and testing services provider ASE Technology Holding Co. dropped 2.95 percent to end at NT$62.60, and King Yuan Electronics Co. finished 2.22 percent lower at NT$26.40 .

Soon after the local equity market opened, TSMC came under pressure in the wake of a decision by the United States last week to ban its companies from using foreign telecoms providers regarded as a security risk, which prompted several American tech companies to restrict their business with Huawei, dealers said.

TSMC shares recovers slightly Tuesday after dipping to the day's low of NT$232.50 but still underperformed the Taiex, which was boosted by non-tech stocks, dealers said.

Google Inc., the U.S.-based search engine provider, said Monday that it was planning to restrict Huawei's access to its Android operating systems and will also limit access to popular applications like Maps, Gmail and the Google Play store on new handsets made by Huawei, the second largest smartphone brand worldwide after Samsung Electronics Co. of South Korea.

Following Google's lead, American chipmakers such as Intel Corp., Qualcomm Inc., Xilinx Inc. and Broadcom Inc. have said they will no longer supply chips to Huawei, according to Bloomberg.

In addition, a ban by some major countries, including the U.S., on Huawei technologies and services is expected to deal a blow to the company's smartphone sales, which in turn could adversely affect suppliers like TSMC, Mega International Investment Services Corp. analyst Alex Huang said.

"Huawei accounts for an estimated 10 percent of TSMC's total sales and that's why the stock came under pressure throughout today session," Huang said. "Investors are worried that Huawei's woes will escalate as more and more tech companies pull away."

TSMC's losses on the local main board Tuesday followed a 3.95 percent dive in its American depositary receipts (ADRs) on the U.S. markets overnight to US$38.66, the lowest in about two months.

"Compared with its ADRs and its U.S. counterparts, TSMC seemed resilient, considering it has been trending lower in recent sessions amid rising trade tensions between the U.S. and China," Huang said.

The company's share price will remain volatile if the global trade disputes are not resolved, he said.

(By Chang Chien-chung and Frances Huang)