The US government assured TSMC, the world’s biggest contract chipmaker, that it will be able to ship the equipment to a manufacturing facility in the Chinese city of Nanjing, meaning the company’s plans to expand its manufacturing footprint in the world’s second-largest economy will remain on track, people familiar with the matter said.
The waiver comes after the US last Friday imposed tough export control regulations on China aimed at thwarting almost every aspect of the country’s semiconductor development.
These rules not only prevent US makers of chip tools from supporting high-end chip production in China but also prohibit companies from third countries, such as TSMC, from using American-made equipment to serve Chinese customers in certain circumstances unless approved by the US.
TSMC is mainly expanding some mature chip production – known as the 22/28-nanometer production node – in Nanjing, its most advanced semiconductor production plant in China. The facility, opened in 2018, also builds chips in the 16-nm grade, which fall under the scope of Washington’s latest export controls.
TSMC, which is due to hold an earnings conference later on Thursday, declined to comment.
TSMC’s revenue from China has significantly decreased since its biggest Chinese chip design customer, Huawei Technologies-owned HiSilicon Technologies, was banned by the US from working with any foreign production partners that use American technologies in the manufacturing process.
China accounted for 10% of TSMC’s revenues in 2021, down from 17% in 2020. Its total revenue from China for the April-June quarter for 2022 was 13%.
Another chipmaker, SK Hynix of South Korea, said on Wednesday that it had won a one-year waiver from the US government to use American chip equipment in China, paving the way for the company to expand in the country.
Despite the waiver to maintain production in China, the US restrictions will still hit TSMC, as they mean it can no longer help its Chinese customers put advanced graphics and AI processors into production. The curbs also mean TSMC’s key US clients, including Nvidia and Advanced Micro Devices, can no longer ship high-end graphics processors for use in the Chinese market.
Mark Li, an analyst with Sanford C. Bernstein, said the US rules only applied to the most advanced grade of graphics processing units for AI and supercomputer applications and estimated that less than 0.5% of TSMC revenue for 2023 will be impacted.
But if the regulations are further tightened to apply to chips for data centre CPUs and GPUs, that could impact up to 5% of TSMC’s revenue for next year in a worst-case scenario, Bernstein estimated.
TSMC’s revenue for the July-September period was 613.14 billion New Taiwan dollars (US$19.29 billion), growing 47.8% from a year ago, the company said last week. TSMC said it estimated its revenue could grow more than 30% in US dollar terms for 2022. Its revenue for January to September grew by 42.6%.