TSMC and South Korean Rivals Lose U.S. Fast-Track Export Privileges for China

Estimated reading time: 2 minutes

Washington has revoked Taiwan Semiconductor Manufacturing Co.’s (TSMC) special fast-track status for U.S. chip-making equipment exports to its Nanjing, China, plant, Reuters reported on Sept. 2. The move comes days after similar actions against South Korean chip makers Samsung Electronics and SK Hynix.

The exemption, known as validated end user (VEU) status, will expire on Dec. 31, after which shipments of U.S.-origin tools to TSMC’s Nanjing site will require export licenses. The plant produces 16-nanometre and other mature node chips, not TSMC’s most advanced semiconductors.

“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.

Taiwan's Ministry of Economic Affairs also said it will continue to maintain close communication with the U.S. and with TSMC "to monitor developments and provide necessary assistance."

The U.S. Commerce Department said it would continue to allow companies to operate existing facilities in China but would not permit expansion or technology upgrades. Jeffrey Kessler, undersecretary of commerce for industry and security, said following the announcement 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.”

Analysts see the financial impact on TSMC as limited, since its Nanjing plant contributes less than 3% of overall revenue. However, the move highlights Washington’s plans to restrict China’s chip-making capacity. “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,” Ray Wang, research director for semiconductors, supply chain, and emerging technology at Futurum Group told CNBC.