Worries about new drought dampen chipmaker prices

Stocks fell to their lowest in four months after the government said it will cut water supplies in the north of the country, home of many electronics factories, because of drought.

Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which needs about 2,000 tonnes of water a day to rinse chemicals that are used to etch patterns on chips, led declines. The company and its affiliates were forced to truck in water to meet their needs during a drought last year.

"The water shortage can hurt semiconductor and flat-panel makers' profit, because water is a vital part of production," said Simon Chao (趙永宏), who helps manage US$18 million in equities at President Investment Trust Corp (統一投信).

The TAIEX shed 81.58, or 1.8 percent, to close at 4,418.11, the lowest since Oct. 22. Decliners outnumbered advancers 537 to 102, while 107 issues ended the session unchanged. Volume was NT$48.82 billion (US$1.41 billion).

MSCI Taiwan futures for February delivery in Singapore fell 2 percent to 184.90. The Taiwan Futures Index dropped 1.8 percent to 4,389.

Water pressure will be reduced at night starting today, Vice Minister of Economic Affairs Yin Chi-ming (尹啟銘) said.

Water may be cut back to 50,000 tonnes from 120,000 tonnes in Hsinchu, the headquarters for TSMC and other companies that make chips and flat-panel displays used in personal computers and cell phones, a local newspaper reported, citing government officials.

TSMC dropped NT$1.80, or 4.2 percent, to NT$41.60. United Microelectronics Corp (UMC, 聯電) fell NT$0.20, or about 1 percent, to NT$19.40.