American government withdraws authorization for TSMC to transport equipment to its factories in China, with the special export license to be revoked by the end of 2025.

In a significant development, the U.S. government has decided to revoke the special privilege for Taiwan Semiconductor Manufacturing Company (TSMC) to export advanced chipmaking tools to its Fab 16 in Nanjing, China. This decision, effective by the end of 2025, could have far-reaching implications for the global semiconductor industry.

TSMC's Fab 16 in Nanjing produces a variety of chips, including automotive chips, 5G RF components, and consumer System-on-Chips (SoCs), on TSMC's 12nm FinFET, 16nm FinFET, and 28nm-class production nodes. The facility, while contributing significantly to TSMC's revenue, accounts for well below 10%.

The move by the U.S. government is part of a broader strategy to curb China's advancement in semiconductor technology. TSMC's American suppliers will now need to seek individual government approvals for future shipments to Fab 16. Any covered tool, spare part, or chemical sent to the facility will need to pass a separate U.S. export review, with a presumption of denial.

The ripple effects of this decision could potentially favour Chinese foundries like Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong. If TSMC is forced to halt or drastically reduce output at its Nanjing Fab 16, these foundries, which offer 14nm, 28nm nodes (for SMIC) and 28nm node (for HuaHong), could witness increased demand. However, it's important to note that China-based companies like AMEC, Kingsemi, Naura, and Piotech have made progress with cleaning, deposition, and etching tools, but they do not currently offer full toolsets with the yield or precision that TSMC requires for commercial-grade 16nm production.

The potential TSMC slowdown in China could also validate the People's Republic's push for semiconductor self-sufficiency. This could mean increased subsidies for chipmakers and tool makers, potentially boosting the utilization and balance sheet of Chinese foundries like SMIC and Hua Hong, assuming they have enough capacity.

However, it remains unclear whether China can provide TSMC with the required lithography systems for a 16nm-class process technology. TSMC may seek to replace some U.S. equipment at its Fab 16 with similar equipment produced in China, but this could present its own set of challenges.

In the meantime, for up-to-date news, analysis, and reviews on this developing situation, it's recommended to follow Tom's Hardware on Google News. In 2024, business with customers from China accounted for 11% of TSMC's net revenue, amounting to roughly $9.91 billion. The impact of the U.S. government's decision on TSMC's operations and financial performance in the coming years will be a topic of keen interest for industry watchers.