Chip stocks drop on fears US to toughen China rules

Technology stocks around the world have slumped on fears about the global computer chip industry.

The selloff came after a report that the Biden administration could be set to further tighten restrictions on exports of semiconductor equipment to China.

Comments by former US President Donald Trump that Taiwan, the biggest producer of chips, should pay for its own defence added to the concerns.

In the US, the tech-heavy Nasdaq index closed 2.7% lower, while chip stocks have also tumbled in Europe and Asia.

In Asia, chip making giant TSMC was trading more than 3% lower in morning trade on Thursday, while semiconductor equipment maker Tokyo Electron was down by around 9.5%.

That came after Nvidia closed 6.6% lower in New York on Wednesday, while AMD lost more than 10%.

In Europe, shares in ASML, which makes chip making machines, tumbled by almost 11%.

The falls came after Bloomberg News reported on Wednesday that the US government is preparing to impose its tightest curbs yet on semiconductor making equipment to China if firms like ASML and Tokyo Electron continue to give the country access to their advanced chip technology.

ASML declined to comment when contacted by the BBC. Tokyo Electron did not immediately respond to a request for comment.

The BBC has also asked the US Commerce Department for a statement.

The Biden administration has previously taken steps to restrict China's access to advanced chip technology.

In October, it restricted exports to China of advanced semiconductors used in artificial intelligence (AI) technology.

The remarks on Taiwan, by President Donald Trump also hinted at possible disruption of global chip supplies.

Taiwan produces most of the world's advanced chips.

"Regardless of the outcome of the elections... I think we will see the US increase some of the restrictions" said Bob O'Donnell, chief analyst at TECHnalysis Research.

"How far they will take it, though, is the big question."