Huawei CFO arrest sends global chip stocks plunging; AMS slides 7%

Aly Song | Reuters

A man walking past a Huawei P20 smartphone advertisement is reflected in a glass door in front of a Huawei logo, at a shopping mall in Shanghai, China December 6, 2018. 

Global 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 trade tensions.

Shares of Austrian chipmaker AMS plunged around 7 percent. Switzerland-based STMicroelectronics dropped 4 percent, while the U.K.- headquartered Dialog Semiconductor slumped around 3 percent.

The moves in European stocks followed losses in Asia, where shares of Japanese chipmakers Sumco, Tokyo Electron and Advantest each fell 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 Department 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 trade relationship weighed on sentiment in the chip sector. Huawei is the world's second biggest smartphone maker by market share, according to research firm International Data Corporation (IDC).

"It's no surprise, then, that a potential disruption to its business and supplier relations would impact the outlook for a wide set of silicon vendors," Peter Jarich, head of GSMA Intelligence, a research firm, told CNBC in an email Thursday.

Chipmakers that rely on global supply chains have been stuck at the center of the trade 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 preventing new tariffs on Chinese and American goods. On Thursday, shares were set to open nearly 3 percent lower as the Huawei news overshadowed optimism about the U.S.-China relationship.