Analysis: Russia-Ukraine conflict may trigger decoupling of China tech stocks from U.S. market

Asian Tech Press (Mar. 4) -- With the escalation of the Russia-Ukraine conflict, Europe and the United States continue to increase sanctions against Russia.

Affected by the situation, Chinese stocks dropped hard en masse on Thursday, with those listed in the U.S., Tencent fell 3.49%, Alibaba 3.19%, NetEase 5.2%, Baidu 3.35% and 5.7%.

Stock performance of major U.S.-listed Chinese tech stocks on Thursday

The three major Chinese electric car makers also underperformed, with XPeng down 9.21%, Li Auto down 7.21% and Nio down 8.68%.

Global business giants have taken measures to sanction Russia, including Apple, TSMC, Google, Boeing, Sony, General Motors and others, covering a wide range of fields such as the Internet, semiconductors, energy, transportation, entertainment and audiovisual.

Currently, the number of participants in the sanctions against Russia continues to increase. These technology companies on that list, TikTok, TSMC, MediaTek, Lenovo, and Didi, have sparked considerable attention because of their ties to China.

TikTok, the world's most popular non-gaming app, is owned by Chinese tech company ByteDance. According to WSJ, TikTok has joined Facebook's parent company Meta in restricting access to some Russian state-controlled media accounts in the European Union, including RT and Sputnik.

A spokesperson for TikTok said Monday that the company has been communicating with the EU and restricting access to entities linked to the Russian government.

TSMC has stopped supplying Russia and its upstream vendors, while carefully studying the sanctions to ensure full compliance with rules and regulations. The chipmaker also noted in a statement that the company "is committed to complying with the new export controls just announced."

The addition of TSMC to list is particularly important in pushing forward with the U.S.-led sanctions, as TSMC is the world's largest chipmaker, including in its most advanced chip manufacturing processes.

Sources close to the matter revealed that the chips that TSMC is no longer manufacturing and shipping are Elbrus-branded semiconductors that are designed in Russia. As Russia's military and security services use Elbrus chips in some computing applications, the loss of TSMC's supply is "devastating" for Russia.

Following TSMC's move to comply with the U.S. banning exports to Russia, IC design leader MediaTek also announced a prohibition on exporting chips to Russia. It recently sent a letter to its customers and partners to ban the export of devices containing its chips to the country.

MediaTek said Thursday that the company has always complied with all applicable laws and regulations and the new export control rules.

Industry sources said that Chinese smartphone brands such as Oppo, Vivo and Xiaomi, which use MediaTek chips, will not be able to export to Russia, equivalent to a ban on exporting products to Russia by non-Apple phone manufacturers.

According to market statistics, in the Russian cell phone market, Xiaomi has the highest market share of 31.2%, followed by Samsung with 29.8%, Apple with 14.5%, Oppo's sub-brand Realme with 4.6% and Xiaomi's sub-brand POCO with 3.8%.

Among them, Chinese smartphone manufacturer Xiaomi's products mostly use Qualcomm-made chips. Xiaomi's smartphone business in Russia will be greatly affected after Qualcomm is also rumored to follow up sanctions against Russia.

In addition, according to Belarusian media outlet Nexta last Friday, Chinese PC maker Lenovo has also stopped shipments to Russia. However, Lenovo has not made an official response to it.

Market analysts say that although Lenovo is called a technology company, the core components of computers such as CPUs, graphics cards, hard disks, memory, etc. are not produced independently and all need to rely on external procurement.

The leading Chinese ride-hailing company, DiDi Global Inc. (DIDI), originally announced on February 21 that it would withdraw from the Russian market on March 4. After netizens questioned "Didi followed the U.S. sanctions against Russia," the company changed its tune on February 26 and said that its local business in Russia would not be closed, and that it would continue to operate in Russia and continue to serve its drivers and passengers well in the future.

As TSMC, Qualcomm, MediaTek, Apple and other companies have imposed sanctions, Russia's smartphone market, military communications and the manufacture of missile guidance equipment will be significantly affected.

The Russia-Ukraine conflict, as well as tensions in U.S.-China relations, could shut down the future direction of Chinese technology companies, invoking a decoupling of Chinese tech stocks from the U.S. market.

Alibaba stocks on Mar. 4

Alibaba, once known as China's top company in terms of market capitalization, has seen its share price fall below HK$100 mark on Friday, currently at HK$99 per share, with a market cap of HK$2.13 trillion.

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