Chipmaker TSMC says ready for potential new US export controls

Taiwan Semiconductor Manufacturing, the world’s largest contract chipmaker, said it was ready to deal with potential new US export controls, which it predicted would have only a temporary impact on its business.

TSMC chairman Mark Liu’s comments on Thursday are the first the company has made on plans by the US government to further restrict supplies to Chinese telecom gear maker Huawei and thwart China’s rise as a technology power. 

Mr Liu urged the US to remember that TSMC was a “massive” business. “We are everyone’s foundry,” he said. He added that the business would comply with the law in every jurisdiction where it operates. “We will deal with every customer equally and fairly,” he said. 

Since the US barred Huawei from buying US supplies last year, TSMC has emerged as the main guarantor for the Chinese company’s continued access to the high-end semiconductors Chinese manufacturers cannot produce themselves. This is possible because US export control rules allow shipments of products that contain less than 25 per cent of US-made content to continue. 

Washington has for several months been leaning on the Taiwanese government to rein in TSMC’s supplies to Huawei, and sales of potentially defence-relevant components to China more generally. Taipei has not complied with the demand. Washington has also demanded TSMC build a fabrication plant in the US and move manufacturing of chips for US military use there. 

The Trump administration is considering tightening the US content threshold from 25 to 10 per cent. Another proposal that could have more wide-ranging fallout would be including US-made semiconductor manufacturing equipment in the calculation of US components. Since such machinery is very expensive, industry experts believe those changes would spell an end to supplies to Huawei altogether. 

Mr Liu’s comments came as the company announced a bullish outlook for this year.

TSMC said it would spend up to $16bn this year on capital investment, up from $14.9bn in 2019. The company expects the ramp-up of 5G telecom services to drive a strong recovery in the semiconductor market. 

TSMC expects the total semiconductor market to grow by 8 per cent and the foundry segment by 17 per cent. “We are confident that we can outgrow foundry by several percentage points,” said chief executive CC Wei. Revenue in the first quarter is forecast to be flat at $10.2bn to $10.3bn.

The company reported a 9.5 per cent increase in revenue and a 16 per cent jump in net income year on year for the fourth quarter of 2019, driven by demand for the semiconductors that power new smartphones. 

TSMC said its outlook had not priced in a shift in US export control rules and that any change would only make a temporary dent. China accounts for 20 per cent of TSMC’s business. “Whatever the export controls are, 5G momentum will be just as strong,” said Wendell Huang, chief financial officer. 

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