Shares of Japanese semiconductor equipment makers fell sharply on Feb. 25 due to potential tighter US restrictions on China’s chip industry.

Tokyo Electron Ltd. dropped as much as 4.4%, its steepest decline in two weeks, with 44% of its revenue coming from China.

Advantest Corp. and Kokusai Electric Corp. lost over 5%, while Screen Holdings Co. also fell by 4.4%.

Market analysts linked the decline to concerns over high exposure to China amid expectations of stricter US policies.

Andrew Jackson of Ortus Advisors noted that the report triggered an immediate investor reaction.

The selloff also coincided with broader weakness in Japan’s tech sector, as a TD Cowen report indicated Microsoft had canceled some data center leases, raising concerns about AI demand.