TSMC Expects Permanent Approval from U.S. for Supplying Chip Tools to Its China Factory

In an illustration taken on March 6, 2023, a smartphone displaying the TSMC (Taiwan Semiconductor Manufacturing Company) logo is placed on a computer motherboard.

Taiwan’s leading semiconductor manufacturer, TSMC (2330.TW), stated on Friday that it anticipates receiving ongoing approval from the United States to provide its China-based facility with U.S. chipmaking tools. This marks a relaxation of Washington’s restrictions on foreign chipmakers operating in China.

TSMC mentioned in a statement to Reuters that the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has recommended that TSMC apply for the “validated end-user” (VEU) program. This program would enable the chipmaker to receive exports without requiring separate approvals.

“We expect to receive a permanent authorization through the VEU process,” TSMC stated, clarifying that they didn’t need to apply for VEU status in the past.

Taiwan’s Economy Minister, Wang Mei-hua, confirmed earlier on Friday that TSMC has been granted the waiver from the United States to supply U.S. equipment to its factory in China.

In October of the previous year, the Biden administration introduced comprehensive export controls, including measures to restrict China from obtaining certain semiconductor chips manufactured anywhere in the world with U.S. tools. This significantly broadened the efforts to impede Beijing’s technological and military progress.

The South Korean government also announced this week that Samsung Electronics (005930.KS) and SK Hynix (000660.KS) will be allowed to continuously supply U.S. chip equipment to their factories in China without needing separate U.S. approvals.

TSMC, recognized as the world’s largest contract chipmaker, revealed last year that it had obtained a one-year authorization from the United States, covering its Nanjing, China factory that produces less advanced 28-nanometer chips.

The company, a significant supplier to Apple Inc (AAPL.O), further noted in the statement that it has secured U.S. authorization to continue its operations in Nanjing while applying for VEU status.

However, the United States remains committed to curtailing China’s access to cutting-edge AI technology and addressing gaps in export controls.

In a recent exclusive report, Reuters revealed that the Biden administration is contemplating closing a loophole that grants Chinese companies access to American artificial intelligence (AI) chips through overseas units.

Last year, the United States strained its relations with Beijing by unveiling new restrictions on shipments of AI chips and chipmaking tools to China, aiming to hinder its military advancements.

TSMC’s shares listed on the Taipei stock exchange closed 0.6% higher on Friday, outperforming the broader market (.TWII) which saw a 0.3% decline.