Taiwan Semiconductor Manufacturing Company (TSMC) is reportedly taking a more circumspect approach in its dealings with Chinese integrated circuit (IC) design firms, especially regarding orders below the 16nm process. This strategic shift comes in response to earlier controversies, specifically allegations about TSMC’s chips being incorporated into Huawei’s AI processors. According to a report from Taiwan Economic Daily, TSMC has communicated to Chinese IC manufacturers that it will halt shipments below the 16nm threshold unless certain compliance standards are met.
This regulatory change has likely been influenced by international tensions, including the previous U.S. administration’s stance and the ongoing technological competition between the U.S. and China. TSMC now requires that any 16nm products ordered from them must have their semiconductor packaging done by firms compliant with BIS (Bureau of Industry and Security) regulations. This policy has been in effect since January 31, prompting several Chinese IC companies to adjust by outsourcing packaging to BIS-approved entities, thereby ensuring uninterrupted business with TSMC.
Although 16nm orders represent less than 10% of TSMC’s business, the move underscores a significant implication for the semiconductor industry’s dynamics, particularly the relationship between Chinese companies and their global partners. Many of these companies, leveraging China’s capability in mature nodes such as 16nm and 18nm, serve international clients including major American and European automotive manufacturers.
This regulatory measure aims to instill greater transparency within China’s thriving semiconductor sector. As ASML’s CEO remarked, the global semiconductor supply chain, including products from China, remains crucial to meeting worldwide market demands. While some adjustments have already been made by Chinese IC businesses to this new operating environment, the broader impact of TSMC’s policy change on China’s semiconductor market will be something to watch in the coming months. By aligning with these regulations, companies can continue to navigate the evolving landscape of global semiconductor manufacturing.
