US pulls TSMC’s waiver for China shipments of chip supplies
The action mirrors steps the US took to revoke VEU designations for China facilities owned by Samsung Electronics and SK Hynix
[WASHINGTON] The US has revoked Taiwan Semiconductor Manufacturing Co’s (TSMC) authorisation to freely ship essential gear to its main Chinese chipmaking base, potentially curtailing its production capabilities at that older-generation facility.
American officials recently informed TSMC of their decision to end the Taiwanese chipmaker’s so-called validated end user (VEU), status for its Nanjing site. The action mirrors steps the US took to revoke VEU designations for China facilities owned by Samsung Electronics and SK Hynix. The waivers are set to expire in about four months.
Washington’s move means that TSMC, Samsung and SK Hynix’s suppliers will have to apply for individual approvals when they want to ship semiconductor equipment and other gear covered by US export controls to the affected China facilities, instead of the blanket authorisation those suppliers currently have because of the plants’ VEU status.
TSMC’s shares slid as much as 1.3 per cent in Taipei, while suppliers including Tokyo Electron fell about 2 per cent.
“TSMC has received notification from the US government that our VEU authorisation for TSMC Nanjing will be revoked effective Dec 31, 2025,” the company said in a statement. “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 revocation adds new hurdles to the China operations of some of the most important companies in the semiconductor sector, hailing from two chipmaking powerhouses that are also US allies. While US officials have said they intend to issue licences needed to keep those facilities operational, the shift introduces some uncertainty about wait times to actually secure those permits. In a statement, Taiwan’s Ministry of Economic Affairs said that revocation of the US waiver would impact the predictability of the Nanjing plant’s operations.
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Officials are currently working on solutions to ease the bureaucratic burden, people familiar with the matter said, particularly given a significant volume of existing licence requests. Revoking Samsung and SK Hynix’s VEU status, for example, will require US officials to process an additional 1,000 permits annually, according to a federal notice.
Compared with Samsung and SK Hynix, which house a sizable share of their production in China, TSMC’s manufacturing footprint in the world’s second-largest economy is relatively small. The company’s Nanjing site began production in 2018 and contributed a small fraction of TSMC’s total revenue last year – and roughly 3 per cent of the company’s overall production capacity, according to the Taiwanese ministry.
The US move will not affect the competitiveness of Taiwan’s chip industry, the ministry said. The campus in question houses technology as advanced as the 16-nanometre process, which first became commercially available more than a decade ago.
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The situation highlights the extent of Washington’s influence in, and control over, the supply chain for electronic components that power everything from microwaves to phones to data centres training artificial intelligence algorithms – even when the plants in question are operated by three non-American companies in a foreign country.
The US has broadly limited China’s access to materials and equipment that could be used to make advanced chips, part of a suite of controls designed to limit the Asian nation’s AI prowess. The export curbs affect sales not just to Chinese companies, but any facilities that are physically within the country – including Samsung, SK Hynix and TSMC’s plants.
Under President Joe Biden’s administration, the trio of companies secured an indefinite waiver to continue making shipments to their China facilities, so long as they comply with security requirements and disclose certain information to the US government. That VEU designation – which US officials announced for Samsung and SK Hynix, and which TSMC publicised in an annual report – was a top priority for the chipmakers and foreign government officials, given that semiconductor plants require regular imports of everything from spare parts to chemicals.
Losing the waivers introduces some uncertainty for top suppliers to TSMC, Samsung and SK Hynix – including machinery companies like Applied Materials, ASML Holding NV, Tokyo Electron and KLA. ASML declined to comment, while Applied Materials had no immediate comment. KLA and Tokyo Electron did not respond to requests for comment.
Shares of Applied Materials and KLA fell in New York trading on Tuesday (Sep 2), as did depositary receipts for ASML, with losses outpacing declines in the broader market.
The Commerce Department’s Bureau of Industry and Security, which oversees semiconductor export controls, announced its VEU decision for the two South Korean companies last week, saying that the US was closing “export control loopholes” that put American companies “at a competitive disadvantage.”
The agency also formally rescinded Samsung and SK Hynix’s VEU status in the federal register, a public account of US regulations – and they did the same for a VEU designation given to Intel, for a facility in Dalian, China, that SK Hynix has since acquired. BIS did not respond to a request for comment about TSMC’s waiver being revoked.
Because TSMC’s VEU status was never published in the federal register in the first place, there was not a public regulation for BIS to amend in the same way as for the other affected companies. All told, though, the net effect on TSMC, Samsung and SK Hynix’s waivers is the same. BLOOMBERG
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