TSMC Stock Remains Steady Despite Demotion in Status

In a significant development, the US government has withdrawn TSMC's expedited license for exporting semiconductor manufacturing equipment to its plant in China, effective December 31, 2025. This means that from that date, shipments to TSMC's Nanjing facility will require a U.S. export license.

This decision follows a similar action taken against Samsung Electronics Co's and SK Hynix Inc's Chinese sites. The US Department of Commerce's Bureau of Industry and Security (BIS) has closed a loophole that allowed foreign companies to export semiconductor manufacturing equipment and technology to China license-free.

The BIS' latest move would not entirely ban export of chip manufacturing tools to China, but requests chipmakers to apply for a license for shipments. This decision is part of the ongoing US investigation into semiconductor imports to determine their impact on national security.

The Nanjing fab primarily produces chips that are less advanced compared to those made in Taiwan. TSMC's stock price closed steady yesterday, remaining unchanged from the previous day at NT$1,160.

Media reports suggest that TSMC is evaluating the situation and taking appropriate measures, including communicating with the US government to prevent disruption to operations at its Nanjing fab. The Minister of Economic Affairs stated that the impact on TSMC should be relatively mild, and the BIS' action will have rather limited impact on Taiwan's semiconductor competitiveness.

It is worth noting that Chinese customers contributed about 9 percent to TSMC's revenue last quarter, a significant decrease from 16 percent in the same period the previous year. Advanced chips and AI chips, which are mainly made in Taiwan utilizing cutting-edge process technologies such as 3-nanometer technology, make up a larger portion of TSMC's business.

The Nanjing site of TSMC only makes up a smaller portion, or 3 percent, of the chipmaker's total capacity. The waivers granted by the BIS are limited to 16-nanometer process manufacturing tools. The Nanjing fab produces less advanced chips using 12-nanometer, 16-nanometer, or 28-nanometer process technologies.

The US officials have informed TSMC of its decision to end the company's authority to freely ship chip manufacturing tools to its Nanjing fab. Despite this, the US authorities have not entirely banned export of chip manufacturing tools to China, but have requested chipmakers to apply for a license for shipments.

This news comes as the US is still investigating semiconductor imports to determine their impact on national security before coming to a decision on the levy. The BIS' action should not be linked to the imminent semiconductors tariffs under Section 232 of the US Trade Expansion Act of 1962.

TSMC, the world's largest contract chipmaker, is now facing challenges as it navigates this new regulatory landscape. The company is expected to continue its efforts to ensure smooth operations at its Nanjing fab and maintain its competitive position in the global semiconductor market.