Shares of Big Asian Chip Makers Fall on U.S. Export Rules for China

TSMC’s fall helped send the Taiex, Taiwan’s stock benchmark, down more than 4%.

United Microelectronics Corp.

UMC -2.76%

, another chip maker based on the island, fell 7%. Taiwan’s stock exchange issued a warning Tuesday on the recent market turbulence, citing reasons including increasing geopolitical risks.

South Korea’s

Samsung Electronics Co.

, the world’s largest memory chip maker, which has facilities in the Chinese cities of Xi’an and Suzhou, fell by as much as 3.9% in early morning trading hours Tuesday, before closing 1.4% lower. Shares of

SK Hynix Inc.,

000660 -1.10%

another South Korean memory chip maker with production sites in China, dropped by as much as 3.5% before closing down 1%.

Tuesday was the first day of trading in Taiwan, South Korea and Japan after the U.S. announcement on Friday.

The new rules from the Commerce Department mostly focus on U.S. companies and their exports to China of advanced chips and chip-making equipment, which are considered key to Beijing’s technological goals.

But non-Chinese chip makers also operate chip-fabrication facilities in China. Industrial executives and analysts said the American restrictions could cause disruptions beyond China and hit sales and operations of South Korean, Taiwanese and Japanese chip makers or producers of chip-making tools.

For instance, the new rules will allow the U.S. to block foreign-made chips that are made with American technology. That means TSMC’s sales of advanced chips from its plants in other regions to Chinese clients could be curtailed, research firm TrendForce said. TSMC declined to comment.

Meanwhile, applications for exports to China to facilities run by non-Chinese companies would be reviewed on a case-by-case basis, the Commerce Department has said. That means for companies such as SK Hynix, which runs a memory chip-making factory in the southeastern Chinese city of Wuxi, any addition of production equipment needed to produce more advanced chips there would require U.S. approval, TrendForce said. The Wuxi fab accounts for about 13% of the world’s total production capacity for DRAM, a type of memory, TrendForce estimated.

Still, South Korea’s Ministry of Trade, Industry and Energy said Saturday that the new U.S. restrictions are projected to have limited impact overall and “not bring significant disruptions to the supply flow of chip-making equipment to South Korean companies operating in China,” including

Samsung

and SK Hynix.

The U.S. had been in close consultations with South Korea in planning its latest export control measures and chose to adopt a special licensing process for equipment supplied to South Korean chip makers to ensure production at their China-based plants aren’t affected, the South Korean trade ministry said.

Samsung declined to comment on the new U.S. rules. A spokesman for SK Hynix said the company would make an effort to acquire a U.S. license for its China facilities and would work with the South Korean government to do so.

South Korea, along with Japan and Taiwan, is a close U.S. partner. The three also have sizable semiconductor business interests in both the U.S. and China.

Chip makers such as Samsung and TSMC count large U.S. companies as major clients. At the same time, China is the largest trading partner for Japan, South Korea and Taiwan. China also serves as an important production base for Samsung, SK Hynix and TSMC.

While the U.S. has called on Seoul, Tokyo and Taipei to form together a semiconductor supply-chain alliance—colloquially known as the “Chip 4” or “Fab 4” alliance—so far the proposal hasn’t fully taken off. Beijing has expressed opposition to such an alliance.

The fallout from the U.S. restrictions could extend beyond semiconductor makers. In Japan, shares of one of the world’s biggest chip equipment makers

Tokyo Electron Ltd.

also fell about 5.5% Tuesday.

In August, Tokyo Electron executive Hiroshi Kawamoto expressed concern about potential U.S. restrictions on selling semiconductor equipment to China. “We can imagine that our Chinese customers would become unable to manufacture their products, so for us this is an extremely worrisome and concerning development,” Mr. Kawamoto said, adding that China accounted for more than 25% of Tokyo Electron’s business.

Two days later, the company’s public-relations department sent an email saying that Mr. Kawamoto’s statement could invite misunderstanding. The email said Tokyo Electron’s policy wasn’t to comment on government regulation.

For some memory chip makers, the U.S. restrictions could ease competitive pressure as they struggle with a sharp drop-off in demand that is widely expected to continue into next year.

One way that the new U.S. measures could help Samsung and SK Hynix is by delaying the progress of Chinese memory makers, said Sanjeev Rana, a Seoul-based technology analyst at CLSA, a Hong Kong-based brokerage.

—Chieko Tsuneoka contributed to this article.

Write to Jiyoung Sohn at [email protected] and Yang Jie at [email protected]