TSMC to see near-term 'operational risk' after US revokes China chip equipment waiver
The Nanjing facility of Taiwan Semiconductor Manufacturing Co (TSMC) faces "operational risk within months" but limited potential long-term impact, according to analysts, after the US government recently revoked the chipmaker's authorisation to freely ship essential equipment to its base in eastern Jiangsu province.
The US action, with effect from December 31, rescinded TSMC's fast track export privilege known as Validated End User (VEU) status, which meant future shipments of US-origin semiconductor equipment to the Taiwanese firm's Nanjing fabrication plant would require individual licences.
Without the blanket VEU coverage, sourcing chipmaking gear would be more difficult for TSMC, according to a Macquarie Group research note on Tuesday.
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"If licence approvals are delayed, fabs may run into shortages that could disrupt operations within months," the note said.
The cancellation of TSMC's VEU status marked the Trump administration's latest effort to tighten chipmaking equipment exports to China, following similar actions against Samsung Electronics and SK Hynix.
An aerial picture shows the production base of Taiwan Semiconductor Manufacturing Co in Nanjing, capital of eastern Jiangsu province, on August 6, 2025. Photo: AFP alt=An aerial picture shows the production base of Taiwan Semiconductor Manufacturing Co in Nanjing, capital of eastern Jiangsu province, on August 6, 2025. Photo: AFP>
In the near term, TSMC may redirect equipment orders originally designated for its facility in Kumamoto, Japan, to Nanjing, and stock up spare parts ahead of the December 31 deadline, according to Phelix Lee, a senior equity analyst at Morningstar.
Still, the US action's long-term impact on TSMC was expected to be limited, as the Nanjing facility made up a small proportion of the chipmaker's total production capacity.
"TSMC's Nanjing fab only accounts for 3 per cent of capacity," Lee said. "Revenue contribution is even lower, as it manufactures lower-priced 16-nanometre and 28nm chips."
By comparison, South Korean memory chip giant SK Hynix might be the hardest hit from the end of China waivers, as 30 per cent of its DRAM and NAND products were estimated to be produced on the mainland, according to Lee.
Licensing could still be viable, according to the Macquarie note. It said the US Bureau of Industry and Security, the agency in charge of chip export controls, recently signalled its intent to grant licences that would sustain existing operations.
In 2022, TSMC said it secured a one-year waiver from the Biden administration to import chipmaking equipment for its 16nm and 28nm production lines at its Fab 16 plant in Nanjing. The company had announced a plan to invest US$2.87 billion in 2021 and expand the fab's capacity to about 40,000 wafers per month by 2023.
TSMC's other mainland facility, known as Fab 10, is in Shanghai.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.
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