US Chip Stocks Plunge as South Korea Probes Chinese Rival and Lawmakers Push Memory Ban

US semiconductor stocks suffered a broad selloff on Thursday, with Sandisk plunging 13%, Seagate falling 10%, Western Digital dropping 9%, and Intel and Micron each declining 6%, according to the Financial Times. The rout erased billions in market value and signaled growing investor unease about the sector's near-term outlook.

The selloff came on a day of multiple headwinds: a regulatory raid on a Chinese chipmaker in South Korea, a new US legislative push to ban Chinese memory imports, and broader profit-taking after a strong run for tech stocks this year.

South Korea Raids Chinese Chipmaker Montage Technology

South Korean authorities conducted an on-site search and seizure at the local office of Montage Technology, a Chinese chipmaker listed on the Shanghai Stock Exchange, according to a regulatory filing. The probe is related to potential competition law violations. Montage Technology specializes in memory interface chips and is a key supplier to major memory manufacturers. The raid adds to escalating trade tensions between China and its neighbors.

US Lawmakers Propose Ban on Chinese Memory Imports

Separately, two US lawmakers introduced legislation that would tighten curbs on Chinese memory chip imports, potentially cutting off a key source of supply that has helped ease the so-called "RAMpocalypse" memory shortage. The proposed ban targets memory chips from Chinese manufacturers, including those from Yangtze Memory Technologies Corp (YMTC) and other firms. Key details include:

• The bill would prohibit US companies from importing DRAM and NAND flash memory from Chinese entities deemed to pose a national security risk.
• It would expand existing export controls to cover memory chips used in consumer electronics, data centers, and military applications.
• The legislation has bipartisan support and could move quickly through committee, though its timeline remains uncertain.

Market Implications and What Comes Next

The combination of a regulatory crackdown in South Korea and a potential US import ban creates a volatile environment for memory and storage companies. Sandisk and Western Digital, which rely heavily on NAND flash supply chains that include Chinese partners, are particularly exposed. Seagate, a hard disk drive maker, faces indirect pressure from potential supply chain disruptions. Intel and Micron, both with significant memory operations, also felt the impact.

Investors are now watching for further regulatory actions from South Korea and the US Congress. The proposed memory ban could reshape global supply chains, forcing companies to diversify sourcing away from China. Meanwhile, the Montage raid may signal a broader antitrust crackdown on Chinese tech firms operating in South Korea. The sector faces a period of heightened uncertainty as geopolitical tensions continue to influence market dynamics.