A 300mm wafer on display at the booth of Taiwan Semiconductor Manufacturing Company during the 2023 World Semiconductor Conference at Nanjing International Expo Center on July 19, 2023, in Nanjing, China.
Vcg | Visual China Group | Getty Images
The U.S. has revoked a waiver that allowed Taiwan Semiconductor Manufacturing Co. to export key chipmaking equipment and technology to its manufacturing plant in Nanjing, China, as Washington continues to ramp up efforts to limit Beijing’s semiconductor advancement.
The change will remove a fast-track export privilege known as validated end user (VEU) status, effective Dec. 31, TSMC confirmed to CNBC on Wednesday.
The world’s largest contract chipmaker had received the exemption soon after the Commerce Department launched its initial restrictions on the sale of U.S.-origin chipmaking tools in 2022.
Under the new policy, shipments of chipmaking tools with American origins to TSMC’s manufacturing facilities in Nanjing, China, will require U.S. export licenses.
“While we are evaluating the situation and taking appropriate measures, including communicating with the US government, we remain fully committed to ensuring the uninterrupted operation of TSMC Nanjing,” the company said.
South Korean memory chipmakers SK Hynix and Samsung also had their VEU privileges revoked on Friday, according to a statement on the Federal Register. Both companies run China-based memory chip facilities.
At the same time, the Department of Commerce’s Bureau of Industry and Security said in a statement that it was closing the VEU “Biden-era loophole” for all foreign semiconductor manufacturers.
It added that it intends to grant export license applications to allow former VEU participants to operate their existing manufacturing facilities in China, but not to expand capacity or upgrade technology in China.
Jeffrey Kessler, under secretary of commerce for industry and security, stated that the Trump administration is “committed to closing export control loopholes — particularly those that put U.S. companies at a competitive disadvantage. Today’s decision is an important step towards fulfilling this commitment.”
According to Brady Wang, associate director at Counterpoint Research, the policy changes “reflect Washington’s broader push to tighten control over semiconductor equipment and technology exports to China, strengthening U.S. power over chip production in China,” he said.
TSMC operates two manufacturing sites in China, one in Shanghai and Nanjing, with the latter facility more advanced. To power its fabrication plants, the company uses hardware from several U.S. chip equipment suppliers, including Applied Materials and KLA Corp.
However, according to Wang, as TSMC’s Nanjing fab contributes less than 3% of TSMC’s total revenue and represents a minor share of its global capacity, the financial impact on the company “should be minor.”
Renewed crackdown?
The recent VEU reversals may come as a surprise to some, as they follow the Trump administration’s announcement that it would ease controls on the export of some American artificial intelligence chips.
Last month, the U.S. said Nvidia and AMD would be allowed to resume exports of some of their previously banned made-for-China AI chips, and signaled that the policy could be expanded.
Prior to that, the administration had also struck down the Biden-era AI diffusion rule, a move that could’ve seen the expansion of export controls on advanced AI chips.
The rollbacks of advanced chip restrictions have been posed by U.S. officials as a way for the U.S. to maintain the supremacy of the AI technology stack globally, including in China.
However, the removal of the VEU exemptions shows that the same logic is unlikely to be applied to memory and chipmaking technologies.
According to Ray Wang, research director for semiconductors, supply chain and emerging technology at Futurum Group, the policies show that Washington remains committed to preventing China from boosting its local chip production capacity and cultivating its local know-how and talent.
“Zooming out, another underlying goal may be to constrain companies’ ability to expand their supply chain footprint in China—particularly in strategic sectors such as semiconductors, which the administration is keen to prevent,” he said.
Conversely, the Trump administration has been working to attract more of the semiconductor supply chain to the shores of the U.S. through tariff threats.
This year, TSMC, SK Hynix and Samsung have committed new investments into their American manufacturing plans.
On Monday, shares of SK Hynix and Samsung fell on the VEU news. However, shares of TSMC traded flat on Wednesday after news of its VEU reversal.
