United States government withdraws TSMC's permission to transport equipment to its Chinese factories - special export license to be withdrawn by the end of 2025

In the dynamic world of semiconductor manufacturing, recent developments have shed light on the challenges faced by Taiwan Semiconductor Manufacturing Company (TSMC) in China.

TSMC, a global leader in advanced semiconductor foundry services, currently operates two facilities in China - Fab 10 in Shanghai and Fab 16 in Nanjing. The 300-mm semiconductor production facility at Fab 16 produces a variety of chips on TSMC's 12nm FinFET, 16nm FinFET, and 28nm-class production nodes. However, the company's progress with cleaning, deposition, and etching tools has fallen short of meeting TSMC's requirements for commercial-grade 16nm production, with Chinese-based companies like AMEC, Kingsemi, Naura, and Piotech yet to offer full toolsets with the yield and precision needed.

The U.S. government's stance on advanced chipmaking tools has further complicated matters. The government has revoked similar permissions for companies like Samsung and SK Hynix, and by the end of 2025, TSMC's VEU authorization for TSMC Nanjing will be revoked. Any covered tool, spare part, or chemical sent to the site will need to pass a separate U.S. export review, with a presumption of denial.

This situation could potentially boost the utilization and balance sheet of Chinese foundries like Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong, assuming they have enough capacity. SMIC currently offers 14nm and 28nm production nodes, while HuaHong has a 28nm node. However, it remains unclear whether TSMC can replace the tools it imports from the U.S. with similar equipment produced in China, particularly for lithography, as there is no known company in China that can produce lithography systems for a 16nm-class process technology.

The development and production of lithography systems for 16nm-class process technology are primarily carried out by American and European companies, a fact that could potentially validate the People's Republic's push for semiconductor self-sufficiency. A forced TSMC slowdown in China could lead to increased subsidies for chipmakers and tool makers, strengthening China's position in the global semiconductor industry.

It's worth noting that business with customers from China accounted for 11% of TSMC's net revenue in 2024, or roughly $9.91 billion. However, TSMC's Fab 16 footprint in China is relatively limited, well below 10% of revenue.

For those interested in staying updated on these developments, Tom's Hardware, a leading source for news, analysis, and reviews in the tech industry, provides valuable insights on the impact of the U.S. government's actions on chipmakers like TSMC. Users can follow Tom's Hardware on Google News to receive updates in their feeds, ensuring they stay informed on this evolving situation.