The U.S. has now made it more difficult for TSMC to ship important chipmaking equipment to its factories in China. Earlier today, the world's largest contract chip foundry said that the United States has pulled its fast-track authorization. Starting on December 31st, TSMC will no longer have the fast-track export privilege that allowed it to send high-tech equipment to China. Starting in 2026, TSMC will need to procure a U.S. export license in order to ship the equipment to China.
TSMC is the top foundry of choice for companies that design chips but don't have the facilities to build them. Companies like Apple, Nvidia, Qualcomm, MediaTek, Broadcom, AMD, and others rely on the Taiwan-based firm to build the chips they design. TSMC says that it is taking a look at the situation and continues to communicate with the U.S. government. It did add that the company remains "committed to ensuring the uninterrupted operations of TSMC Nanjing." This Chinese fab produces 28nm, 16nm, and 12nm chips. While not cutting-edge components, they are still in demand.
In 2022, the U.S. issued restrictions on the shipment of chipmaking equipment to China. The goal was to prevent the Chinese military from accessing powerful, cutting-edge semiconductors. The United States waived these restrictions for TSMC and other companies such as Samsung Foundry and SK Hynix. The two South Korean firms also had authorizations for their Chinese plants pulled last Friday, and this action will take place in 120 days.
Is the U.S. shooting itself in the foot again by revoking these licenses?
Yes. It stops U.S. companies from booking revenue in China.
85.71%
No. China cannot be allowed to have cutting-edge equipment.
14.29%
I don't have an opinion.
0%
In some ways, it is a surprising decision on the part of the Trump administration, which has been looking to reduce the restrictions placed on AI-chip exports during the Biden era. Just last month, the current administration approved licenses allowing Nvidia to sell its H20 GPU/AI Accelerator chip in China. This move will allow Nvidia to compete with Chinese manufacturer Huawei inside the country.
Previously, U.S. bans preventing Nvidia from selling its H20 AI accelerator chip in China helped Huawei generate huge sales of its Ascend 910C AI accelerator. In a way, the U.S. shot itself in its foot. As we noted five months ago, "The very tool that the U.S. has wielded in an effort to hurt Huawei, sanctions, has actually helped the company grow its AI business while slowing down Nvidia's AI revenue in China." Now, thanks to the Trump administration, Nvidia will have the opportunity to grow its business in a huge market.
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On Friday, the Commerce Department said that it will issue licenses allowing the foreign companies to continue operating their facilities in China. The operators will not be allowed to expand the factories or update the technology.
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