TSMC Limits Orders Below 16nm from China Due to New US Regulations Compliance

Recent reports indicate that Taiwan Semiconductor Manufacturing Company (TSMC) is tightening its policies regarding orders from Chinese integrated circuit (IC) design firms, particularly concerning semiconductor technologies below the 16nm node. This move signifies that TSMC is exercising greater caution in its dealings with Chinese companies.

Conditions for Collaboration with Chinese Chip Makers

TSMC’s newfound approach appears to be a response to previous controversies, particularly after it was revealed that some of its chips were utilized in Huawei’s artificial intelligence processors. As highlighted by a report from Taiwan Economic Daily, the semiconductor giant has instructed Chinese IC manufacturers that it will halt shipments of products below 16nm unless they adhere to specific regulations detailed later in this article. This cautious stance is influenced significantly by geopolitical tensions, notably the escalating “chip war”between the United States and China, particularly during the Trump administration.

According to the report, TSMC will not process orders for 16nm products unless they have been packaged by a company listed on the Bureau of Industry and Security (BIS) compliant Outsourced Semiconductor Assembly and Test (OSAT) list. This regulation reportedly came into effect on January 31st. To adapt, several Chinese IC design firms have begun re-routing their packaging orders to BIS-approved entities to maintain their supply chain with TSMC. Notably, orders for 16nm technology constitute less than 10% of TSMC’s total revenue, suggesting that this restriction is unlikely to significantly impact the company’s financial stability.

TSMC's advanced semiconductor technology

The BIS whitelist procedure aims to bolster transparency within China’s semiconductor sector. Given that China leads in the volume production of mature nodes such as 16nm and 18nm, this regulation has broad implications. Interestingly, many of China’s customers for these nodes are American and European automotive manufacturers. As pointed out by ASML’s CEO, the international market still relies on semiconductors produced in China to meet ongoing supply demands.

The response of the Chinese semiconductor industry to TSMC’s new restrictions will be closely monitored. While it is expected that many IC design companies will adapt swiftly to these regulations, the overall market reaction may remain subdued.

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