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The heavy regulatory crackdown on Chinese tech companies has seen the valuations eroding nearly 30% since the beginning of 2021. Other Asia competitors are making the most of it.
World’s largest chipmaker – Taiwan Semiconductor Manufacturing Co Ltd (TPE: 2330) – emerged as the most valuable company in Asia overtaking the Chinese tech juggernaut Tencent. Amid Beijing’s ongoing crackdown on the tech sector, Alibaba Group Holding Ltd (NYSE: BABA) and Tencent Holdings Ltd (HKG: 0700) valuations came crashing down. Just in the last two months, Tencent lost one-third or $250 billion of its valuations.
TMSC, one of the biggest suppliers to Apple Inc (NASDAQ: AAPL), overtook Tencent earlier this month. This brings the Taiwanese chipmaking giant to the top spot by market capitalization. As of the data presented by Refinitiv Eikon on Wednesday, August 18, TMSC’s valuations stood at a massive $538 billion.
Tencent’s valuations dropped to the second spot at $535 billion. On the other hand, Chinese e-commerce giant Alibaba stands in the third position with $472 billion in valuations.
Semiconductor Shortage Brings Good Times for TMSC
The semiconductor shortage has been severely affecting tech product manufacturers and automobile players worldwide. There’s a severe supply chain issue amid amind the disruptions caused by the pandemic. At the same time, there’s a surge in demand for automobiles and data centers.
However, this comes as a boon for TMSC. Looking at the market opportunity ahead, TMSC is willing to invest an additional $100 billion over the next three years. It will use these funds for further capacity expansion.
With a strong clientele such as Apple, Qualcomm, and Nvidia, TMSC sees a promising business opportunity ahead. As Warren Buffett says, TMSC can be regarded as a MOAT business in the semiconductor manufacturing industry.
China’s Major Crackdown on Tech
Amid fears of private tech players controlling a major part of user data, Chinese regulators have lashed a whip at the local tech companies. Giants like Alibaba and Tencent have to face the brunt of the same.
Over the last two months, billions of dollars have been eroded from the country’s valuations. On Tuesday, both Tencent and Alibaba lost a massive $20 billion each. This comes as the Chinese regulators issued draft rules to halt unfair competition on the internet.
As a result, China’s State Administration for Market Regulation is pushing strict laws around antitrust and competition. Thus, Chinese technology stocks have faced a hammer blow recently plummeting in the local markets. As said, some of the big technology companies have lost a total of 25-30% in valuations since the beginning of this year.