US pulls TSMC’s waiver for China shipments of chipmaking gear supplies

Hong Kong – The US has revoked Taiwan Semiconductor Manufacturing Co’s (TSMC) authorisation to freely ship essential gear to its main Chinese chipmaking base, potentially curtailing its production capabilities at that older-generation facility.

US officials recently informed TSMC of their decision to end the Taiwanese chipmaker’s so-called validated end user, or VEU, status for its Nanjing site.

The action mirrors steps the US took to revoke VEU designations for China facilities owned by Samsung Electronics and SK Hynix. The waivers are set to expire in about four months. 

“TSMC has received notification from the US government that our VEU authorisation for TSMC Nanjing will be revoked effective Dec 31, 2025,” the company said in a statement.

“While we are evaluating the situation and taking appropriate measures, including communicating with the US government, we remain fully committed to ensuring the uninterrupted operation of TSMC Nanjing.”

The company’s US-listed American depositary receipts slipped as much as 2.3 per cent on Sept 2.

The US move means TSMC suppliers will have to apply for individual approvals when they want to ship semiconductor equipment and other gear covered by US export controls to its Nanjing facility, instead of the blanket authorisation they had with VEU status.

The policy change jeopardises the China operations of some of the most important companies in the semiconductor sector, hailing from two chipmaking powerhouses that are also US allies.

While US officials have said that they intend to issue licences needed to keep those facilities operational, the shift introduces uncertainty about wait times to secure those permits.

Officials are currently working on solutions to ease the bureaucratic burden, particularly given a significant backlog of existing licence requests, people familiar with the matter said. 

In a statement, Taiwan’s Ministry of Economic Affairs said that the revocation of the US waiver would impact the predictability of the Nanjing plant’s operations.

At the same time, the ministry said, the facility accounts for roughly 3 per cent of TSMC’s overall production capacity and the US move will not affect the competitiveness of Taiwan’s chip industry.

Compared with Samsung and SK Hynix, which house a sizeable share of their production in China, TSMC’s manufacturing footprint in the world’s second-largest economy is relatively small.

The company’s Nanjing site began production in 2018 and contributed a small fraction of TSMC’s total revenue in 2024. The campus houses technology as advanced as the 16-nanometer process, which first became commercially available more than a decade ago. 

All told, the net effect on TSMC, Samsung and SK Hynix is the same: When the VEU revocation takes effect, suppliers to the chipmakers’ China facilities will need to proactively seek US licences for shipments of goods that are covered by US export controls. That includes everything from advanced manufacturing gear to spare parts and chemicals that are consumed in the production process. 

The situation highlights the extent of Washington’s influence in, and control over, the supply chain for electronic components that power everything from microwaves to phones to data centres training artificial intelligence (AI) algorithms – even when the plants in question are operated by three non-American companies in a foreign country. 

The US has broadly limited China’s access to American materials and equipment that could be used to make advanced chips, part of a suite of controls designed to limit the Asian nation’s AI prowess.

The export curbs affect sales not just to Chinese companies, but also any facilities that are physically within the country – including Samsung, SK Hynix and TSMC’s plants. 

Under former president Joe Biden’s administration, the trio of companies secured an indefinite waiver to continue making shipments to their China facilities, as long as they complied with security requirements and disclosed certain information to the US government.

That VEU designation was a top priority for the chipmakers and foreign government officials, given that semiconductor plants require regular imports of supplies to keep running. BLOOMBERG