Tokyo Electron Leads Japan Tech Selloff on China Chip Curb Fears

(Bloomberg) — Tokyo Electron Ltd. shares tumbled by the most in three months after Bloomberg reported US discussions about using its most severe trade restrictions to curb China’s access to advanced semiconductor technology. The Nikkei stock gage also slid, reversing earlier gains.

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The Biden administration has told allies that it’s considering invoking the foreign direct product rule on companies such as Japan’s Tokyo Electron and the Netherlands’ ASML Holding NV that supply Chinese chip firms, people familiar with recent discussions said. The rule lets the country impose controls on foreign-made products that use even the tiniest amount of American technology.

Shares in Japan’s biggest semiconductor equipment maker fell by as much as 8.3%, its biggest intraday fall in three months on Wednesday. Shares of Screen Holdings Co. declined 5.1%, Disco Corp. shed 4.1% and Advantest Corp. fell as much as 2.5%.

Tokyo Electron relies on China for more than 20% of its sales, said T&D Asset Management Chief Strategist Hiroshi Namioka. “The fact that it’s at the center of this case is likely to weigh on the stock price,” he said.

Tokyo Electron and ASML supply key chipmaking machinery, as do US firms Applied Materials Inc., Lam Research Corp. and KLA Corp. The US is presenting the idea to officials in Tokyo and the Hague as an increasingly likely outcome if the countries don’t tighten their own China measures, according to the people, who asked not to be identified because the deliberations are private.