The United States government has yet again issued Taiwan Semiconductor Manufacturing Company’s (TSMC) removal from authorization to export advanced technology to the People’s Republic of China (PRC). They told TSMC this decision only very recently. Although the measure won’t take effect until the end of this year, it could undermine the company’s evolving manufacturing presence in China. As the world’s largest and most advanced contract semiconductor manufacturer, TSMC particularly dominates the production of older-generation devices in China. As vital as these operations are, they now confront extraordinary headwinds.
Washington is just beginning to impose broadbrush restrictions on the export of advanced technology to China—including artificial intelligence. This revocation is a critical piece of their larger plan to shield the US economy from harm. This decision comes on the heels of a parallel action taken last week against tech behemoths Samsung and SK Hynix from South Korea. The US administration, under the Trump administration’s legacy, is tightening its grip on technology transfers to prevent potential military applications and to protect its own technological advancements.
The previous authorization granted to TSMC has now been rescinded. Currently, US suppliers need to apply for specific exemptions before they can send certain products to TSMC’s factories in China. This new requirement would add significant complications and costs to TSMC’s shipments, interfering with their operational efficiencies. The business’s only option is to squeeze every dollar’s worth of performance out of its current machines. This is particularly true where pure performance isn’t as key the more it slides under these regulatory hoops.
This change would likely push Chinese consumers to look for domestic replacements. They will possibly have to look elsewhere for their semiconductor needs. Yet, these local options can be at least three generations behind TSMC’s cutting-edge technology. This development may inadvertently foster innovation among Chinese companies as they strive to optimize their operations and make the most of available resources.
Now the US government has swapped out those initial waivers given to select global tech companies for new, harsher restrictions. This amendment represents a huge turn in the policy tide. These restrictions aren’t limited to TSMC. Yet they represent an alarming, growing current of technonationalism and economic protectionism that threatens to reorder the world’s supply chains.