The Chinese government’s crackdown on its tech industry continues to impact companies and their owners. About $1.5 trillion has been wiped off China’s economy, and a growing number of Chinese businessmen are dropping ranks on the global billionaires’ index. And it all seems to be getting started.
CNBC reports that the world’s largest chipmaker Taiwan Semiconductor Manufacturing Company (TSMC) has overtaken Chinese tech behemoth Tencent to become Asia’s most valuable firm, further spiraling the downturn emanating from the crackdown that started about a year ago.
Beijing’s regulatory crackdown on the country’s tech sector has slammed the valuations of Chinese tech giants Tencent and Alibaba, and both the companies have recorded significant losses, losing their financial status in Asia and global markets.
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According to the report, TSMC, a major supplier to Apple, overtook Tencent earlier in August. The Taiwanese chipmaker is now sitting at the top spot by market capitalization — among Asia firms — at more than $538 billion, according to data from Refinitiv Eikon as of Wednesday morning during Asia hours.
Tencent sat in second place, with a market capitalization of more than $536 billion while Alibaba was a distant third at about $472 billion.
The report further noted that the market capitalizations of both Tencent and Alibaba were hit again on Tuesday — losing more than $20 billion each — after China’s market regulator issued draft rules aimed at stopping unfair competition on the internet.
China’s State Administration for Market Regulation highlighted the move on the tech sector as part of the regulator’s push to tighten laws surrounding antitrust and competition. Other areas that have come under regulatory scrutiny from Beijing include financial technology as well as the collection and use of data.
Chinese technology stocks have tumbled as uncertainty continues to cloud the sector. The Hang Seng Tech index, which tracks the largest technology companies listed in Hong Kong including Tencent and Alibaba, has dropped more than 25% since the start of the year.
Although TSMC’s growth got a boost from the global semiconductor shortage driven by supply chain disruptions due to the pandemic, along with a surge in demand from industries such as automobiles and data centers, China’s regulatory clampdown on its tech industry paved the way for the current position it occupies on the value chain. Since the start of the year, TSMC’s stock has risen by more than 6%.
But Tencent is anticipating a stretch of the regulatory straits. The company warned Wednesday more regulations will likely come for the internet sector in China but said it is “confident” it can be compliant.
“We should expect … in the near future, more regulations should be coming,” Martin Lau, president of Tencent, said during an earnings call on Wednesday.
Lau said that internet regulation is a “global trend” but China is ahead of Europe and the U.S. in terms of the “execution of a more structural regulation framework.”
“I think this should be expected because the regulation has been actually quite loose over an industry like the internet, considering its size and the importance,” he added.
The Tencent president said regulators are focused on “rectifying industry misbehaviors” and emphasizing social responsibility. But ultimately the goal is “long-term sustainable development of the internet industry.”
“The government does recognize the importance on the economic and social sides of the internet industry and also the contribution of the industry to global competitiveness.
“I would say there will be short-term uncertainties and there are a lot of new regulations that will be coming, but we are pretty confident that we can be compliant,” Lau said.