Apple said to move to own chips sooner

Report says firm plans to start using its chips as soon as 2020 rather than processors made by from Intel, spurring investors to pull out hundreds of millions

Apple has issued a recall on certain earlier units of its MacBook Pro after faults were found in some batteries. Reuters

A bad day for chip makers just got worse.

Semiconductor shares in the S&P 500 Index fell 4.4 per cent at the close of trading, their worst performance since February 8, after a report that Apple plans to start using its chips as soon as 2020 rather than processors made by from Intel. All 15 members of the group lost at least 2.6 per cent, with Intel down 6.1 per cent, its biggest rout since January 2016.

The group was already lower by 3 per cent before the Bloomberg News report, as a renewed tumble in technology shares led broader market measures to the worst day since the early February sell-off. Chip makers, which set a record just three weeks ago, have now lost 11 per cent amid an exodus of cash from a popular semiconductors exchange-traded fund last month.

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“This is part of the tech unwind story that was exacerbated with Apple’s move toward eliminating parts of the food chain in favour of doing it themselves,” said Josh Lukeman, head of ETF market making for the Americas at Credit Suisse.

Investors pulled almost a half a billion dollars - the most on record - from the VanEck Vectors Semiconductors fund in March. The fund, which goes by the ticker SMH, had attracted record inflows a month earlier.

While Intel pushed the group deeper into the red, there were other signs of trouble in a group that had rallied more than 50 per cent in the prior two years.

Nvidia, the ETF’s fifth largest holding at 5.1 per cent, is down 8 per cent in two weeks. It more than tripled in 2016 and doubled again last year. Micron Technology, another sector heavyweight, has lost 18 per cent since March 20, after it gave a disappointing sales forecast for the third quarter. Its dizzying pace of revenue growth had fuelled its rally.