The losses extended a sell-off across the industry globally following an eye-watering rally over the past two years that has sent several indexes and companies to record highs.

They also overshadowed a more upbeat outlook over the Middle East conflict as the United States and Iran paused tit-for-tat strikes for a third day and Donald Trump suggested there was a "good chance" of a deal to end hostilities.

Semiconductor firms were at the forefront of a region-wide rout Tuesday after website The Information said China's Shanghai Yuliangsheng had started mass production of a chipmaker technology long dominated by Dutch firm ASML.

Seoul-listed SK hynix and Samsung lost around 13 percent, dragging the Kospi index down 10.2 percent, having earlier been paused for a 20-minute circuit-breaker.

The two firms have fallen almost 50 percent since hitting all-time highs last month, while the Kospi is down more than 30 percent.

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Tokyo's Nikkei tanked more than four percent as Kioxia shed 18 percent, while Advantest and Tokyo Electron dived 11 percent.

Taipei was also off more than four percent as market heavyweight and chip giant TSMC took a hit.

There were also losses across the rest of Asia.

Tuesday's hammering followed a bleak day on Wall Street, where the Philadelphia Semiconductor Index dropped 2.2 percent as Sandisk tanked 11 percent, while Advanced Micro Devices and Nvidia gave up around five percent.

ASML shed more than eight percent in Amsterdam.

The AI trade was already fracturing in recent weeks owing to worries about the vast sums that had been invested in AI, which had fueled questions about when that would actually begin seeing a return, while extended valuations had also raised eyebrows.

"The immediate fundamentals of semiconductors have not collapsed," wrote Stephen Innes at SPI Asset Management.

"Demand for high-bandwidth memory remains strong, hyperscalers are still spending, and the largest technology companies have not yet abandoned their capital expenditure plans.

"What has changed is the market's willingness to capitalize those promises at almost any price.

"The AI trade spent the past several years behaving like a flywheel: rising equity values encouraged more spending, more spending validated higher earnings expectations, and those expectations pushed valuations higher again.

"Now that same wheel is beginning to throw investors off at speed."

Traders are awaiting earnings this week from SK hynix, Samsung and Kioxia as well as US titans Microsoft, Meta, Apple and Amazon.

The bloodbath in tech overshadowed renewed optimism over the US-Iran crisis, with the two sides stepping back after almost two weeks of retaliatory attacks sparked by a breakdown in diplomacy over Tehran's blockade of the Strait of Hormuz.

Trump expressed hope that renewed diplomacy could bring an end to the war that began in late February.

"I have a lot of patience [...] We'll see what happens," he said aboard Air Force One. "I think there is a good chance that something could happen."

Meanwhile, reports said Oman and Iran were trying to reach an agreement to restart shipping through Hormuz, through which a fifth of global oil and LNG usually pass.

Hopes for a deal sent both mains sharply lower, with international benchmark Brent losing more than eight percent Monday and WTI more than seven percent. Both were down more than one percent in Asian trade.

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