Taiwan stock chip stocks face intensified short-term adjustments, with MCU and automotive chip demand facing tests

Asia’s manufacturing sector continues to hit new lows, with PMI data signaling a clear recession signal. China’s official manufacturing PMI has declined for two consecutive months to 48.7, falling below the expansion-contraction line of 50, reaching a new low for the year; South Korea’s manufacturing index dropped to 49.2, Taiwan’s fell to 49.8, and manufacturing activity in the three major economies has all entered the contraction zone. This round of economic downturn has had an immediate impact on Taiwan’s export-driven semiconductor supply chain, especially putting direct demand pressure on MCU concept stocks and automotive chip suppliers.

How Weak Exports Are Eroding Profit Margins in the Chip Sector

Over the past two weeks, export-oriented chip stocks such as TSMC, UMC, Silicon Power-KY, and Macron have experienced a broad correction. TSMC’s stock price slightly declined by 1.5%, reflecting market concerns over a slowdown in global orders. This is not merely a technical weakness but a dual squeeze from both supply and demand sides.

The semiconductor industry is highly dependent on exports—logic chips, memory, capital ICs, automotive chips, and MCUs mainly rely on overseas markets for orders. When global demand weakens, downstream industries such as automotive manufacturing and industrial control immediately slow their procurement pace. Meanwhile, the globalization of Asian supply chains leads to rising raw material procurement, packaging outsourcing, and logistics costs, gradually compressing gross margins in wafer foundries, packaging and testing, and IC design.

More troubling is that order reductions trigger a series of inventory adjustments—when foundries and packaging plants receive signals to cut back, they first adjust capacity, and accumulated inventories suppress chip prices and margins. This chain reaction eventually spreads throughout the entire supply chain downstream.

MCU and Automotive Chips as the Most Risk-Exposed Segments

During this PMI decline cycle, all Taiwanese export chip stocks have been hit, but MCU concept stocks and automotive chip suppliers are the most directly affected. Several Taiwanese IC design and packaging/testing companies have revealed that their 2025 orders are still within control, but visibility for 2026 has already significantly decreased.

Prices for automotive MCUs, power management ICs (PMICs), and NOR Flash have become noticeably more conservative, directly reflecting automakers’ cautious attitude toward medium- and long-term demand. Industry insiders warn, “Interruptions or shortages of low-end chips will directly disrupt the production processes of vehicles or industrial equipment, and the chain reaction could impact annual performance.” This means that as the core components of automotive electronics, weak MCU orders will directly affect the entire automotive supply chain’s production plans.

In the US stock market, chip giants like Nvidia, Intel, and AMD have also experienced stock price fluctuations. Analysts point out that the uncertainty in chip demand mainly stems from shrinking Asian manufacturing PMI and uncertain prospects for AI chips, automotive electronics, and industrial control chips.

Three Major Risks Investors Should Monitor in 2026

In the face of the current situation, investors should focus on the following key variables:

Supply concentration risk of mature process chips—Chips manufactured with 40 to 180 nanometer processes are highly dependent on a few manufacturers and specific countries. Any supply disruption could amplify market volatility, creating bottlenecks in the production of traditional chips like MCUs.

Uncertainty from geopolitical and trade frictions—The ongoing US-China trade disputes may alter order flows and capacity scheduling, affecting the global distribution of supply chains.

Timing of global demand recovery—If chip orders do not rebound in the first half of 2026, inventory pressures in segments like MCUs and automotive chips will intensify further, and the timeline for stock price stabilization will be delayed.

Cautious Positioning Rather Than Blind Expansion—The Key Is to Choose Differentiated Opportunities

Currently, Taiwanese chip stocks are experiencing high volatility, but this does not mean the long-term growth trajectory of the industry has changed. If geopolitical tensions and trade frictions continue to worsen, supply chain structures will face reshuffling. Diversified supply sources, inventory optimization, and customer loyalty will become the core issues for companies and investors in the next phase.

The investment strategy during this period should be cautious allocation rather than full-scale expansion. Focus on monitoring order changes, supply chain movements, and capacity scheduling. For the semiconductor industry, do not rely on the illusion that “short-term fluctuations will automatically self-correct.” Instead, prepare for at least six months or more of instability and high volatility.

However, trends such as technological upgrades, long-term demand from AI and data centers, and strategic diversification of supply chains remain valid. For long-term investors and institutions, selecting semiconductor companies with solid fundamentals, clear order visibility, and resilient supply chains—especially those with competitive advantages in segments like MCUs and automotive chips—can still offer opportunities for significant growth over the next 2 to 3 years. The key is to choose quality over following the crowd blindly.