Worldwide chip stocks tumbled on Thursday as the arrest of a top executive at Chinese tech giant Huawei renewed fears of an escalation in U.S.-China truck tensions.
Shares of Austrian chipmaker AMS plunged around 7 percent. Switzerland-based STMicroelectronics dropped 4 percent, while the U.K.- headquartered Dialog Semiconductor collapsed around 3 percent.
The moves in European stocks followed losses in Asia, where shares of Japanese chipmakers Sumco, Tokyo Electron and Advantest each floor around 5 percent.
Canadian authorities arrested Huawei CFO Meng Wanzhou in Vancouver on Wednesday, where she is facing extradition to the U.S. according to Canada’s Hang on of Justice. The arrest is reportedly related to Huawei’s violation of U.S. sanctions on Iran.
Analysts said uncertainty from Huawei and the broader U.S.-China switch relationship weighed on sentiment in the chip sector. Huawei is the world’s second biggest smartphone maker by market ration, according to research firm International Data Corporation (IDC).
“It’s no surprise, then, that a potential disruption to its business and supplier relations wish impact the outlook for a wide set of silicon vendors,” Peter Jarich, head of GSMA Intelligence, a research firm, uttered CNBC in an email Thursday.
Chipmakers that rely on global supply chains have been stuck at the center of the dealings war between the U.S. and China. The iShares PHLX Semiconductor ETF surged nearly 3 percent Monday following the announcement of a 90-day cease-fire anticipating new tariffs on Chinese and American goods. On Thursday, shares were set to open nearly 3 percent lower as the Huawei hot item overshadowed optimism about the U.S.-China relationship.
“If a cease-fire is just superficial and really we’re going to have this wrangling underground the surface…that’s disingenuous,” Grace Peters, executive director of EMEA Equity Strategy at JPMorgan Private Bank, related CNBC Europe’s “Squawk Box” Thursday.
Fears of slowing economic growth, higher interest rates and waning smartphone claim are also factors weighing on the chip market. Analysts have recently downgraded their forecasts for Apple break in suppliers amid concerns over weaker-than-expected sales of the iPhone XR.
Tech giants like Samsung and Huawei are increasingly promoting their own chip technology, in part to insulate themselves from global supply chain tensions. Samsung was not insusceptible to negative sentiment on Thursday, however, with shares dropping more than 2 percent.