TSMC Steps Cautiously with China: New 16nm Order Restrictions Explained
Things are getting a little more complicated in the semiconductor world, especially between major players like TSMC and China. Recent reports have suggested that TSMC, the giant Taiwanese chip manufacturer, is being more cautious about orders coming from Chinese Integrated Circuit (IC) design companies. What's the story here?
Why the Change? US Regulations and "Chip Wars"
The word on the street is that TSMC has now put restrictions in place for orders of chips manufactured in processes smaller than 16 nanometers-and this affects mainly Chinese companies. Why? It all comes down to adhering to strict regulations set by the United States. You may recall the furor when chips it manufactured ended up in the AI processors of Huawei, really setting tongues wagging. This latest move could therefore seem a sort of direct response, if one considers the need to avoid similar situations and negotiating increasing tensions within this "chip war" between the US and China.
The Taiwan Economic Daily, citing industry sources, reported that TSMC has informed Chinese IC designers that it would only accept orders for processes below 16 nm if the packaging of the chips is conducted by an OSAT company in compliance with the regulation set by the US Bureau of Industry and Security. The rule reportedly started at the end of January.
Impact and Implications
So, what does this really mean? For Chinese IC design companies needing to use the advanced manufacturing level of TSMC, for instance, the chip packaging would have to be made by a BIS-approved company. In fact, it would seem many are already adjusting to this, shifting their packaging orders to meet compliance and continue their orders with TSMC. Interestingly, 16nm orders are said to be a relatively small part of TSMC's overall revenue, less than 10%, so the immediate financial impact on TSMC itself might be limited.
But there's a bigger picture here: the BIS whitelist process is supposedly in place to increase transparency within China's semiconductor industry. Yet China is also one of the major producers of mature nodes like 16nm and 18nm, while most of the end customers for those chips are American and European car makers. It's worth reiterating-as ASML CEO Peter Wennink once said-the world relies on semiconductors built by China to make up the balance in demand across the world. That raises, at best, the precariously fragile and therefore increasingly difficult-to-balance global supply chain for semiconductors.
It's still early days, and the long-term effects of these restrictions remain to be seen. We are watching how the Chinese semiconductor industry responds and adapts to these new rules. For now, it would appear Chinese companies are adjusting to maintain their access to TSMC's manufacturing, suggesting a pragmatic approach to navigating these complex international regulations.
Keep an eye on this space – the semiconductor world is anything but static right now.
