New U.S. regulations are making it more difficult for TSMC to export chipmaking equipment to China.

The U.S. government has tightened regulations concerning TSMC's ability to export chip manufacturing equipment to its Chinese facilities. The world's largest contract chip manufacturer announced that the U.S. revoked its expedited approval. TSMC will no longer benefit from the streamlined export process that facilitated the shipment of advanced equipment to China after December 31. Starting in 2026, TSMC will be required to obtain an export license from the U.S. to ship such equipment to China.

TSMC is a primary foundry for firms that design chips but lack production capabilities. Companies like Apple, Nvidia, Qualcomm, MediaTek, Broadcom, and AMD depend on the Taiwan-based company to manufacture their designs. TSMC stated that it is assessing the situation and is in communication with the U.S. government. The company added that it is still "committed to ensuring the uninterrupted operations of TSMC Nanjing." This Chinese plant produces 28nm, 16nm, and 12nm chips, which remain in demand despite not being leading-edge.

In 2022, the U.S. imposed restrictions on exporting chipmaking equipment to China, aiming to prevent the Chinese military from gaining access to advanced semiconductors. These restrictions were initially waived for TSMC, Samsung Foundry, and SK Hynix. The authorizations for the two South Korean companies' Chinese factories were also rescinded last Friday, with the change taking effect in 120 days.

This decision is somewhat unexpected, given that the Biden administration has sought to ease restrictions on AI-chip exports. Last month, the administration approved licenses for Nvidia to sell its H20 GPU/AI Accelerator chip in China. This action enables Nvidia to compete with the Chinese company Huawei within China.

Previously, U.S. bans on Nvidia's H20 AI accelerator chip sales in China helped Huawei increase sales of its Ascend 910C AI accelerator. In some ways, the U.S. undermined its own position. As previously noted, U.S. sanctions intended to harm Huawei inadvertently boosted the company's AI business while slowing Nvidia's AI revenue in China. Now, Nvidia has an opportunity to expand its presence in a substantial market.

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