Taiwan’s TSMC expects permanent U.S. approval to supply chipmaking tools to its China factory, easing the restrictions Washington imposed last year on foreign chipmakers operating in the country. The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has advised TSMC to apply for the “validated end-user” (VEU) program, which would allow the chipmaker to receive exports without separate approvals, the TSMC said on Friday. The company should have said how long it expected the process to take.
The world’s biggest contract chipmaker, TSMC, makes chips for other companies that do not have their chip manufacturing plants — known as fabs. This includes Apple Inc’s iPhones and Mac computers, Nvidia Corp’s flagship H100 graphics cards, and specific Intel Corp processor components.
As a result, it is highly exposed to the cyclical industrial dynamics of the chip business, which often sees a surge in demand in upturns and a slowdown during downturns. To be able to respond to these fluctuations, foundries need to be able to scale up production capacity quickly to meet strong demand. However, such expansions can require considerable equipment investments that must be paid off over several years.
That is one of the reasons TSMC, like other significant foundries around the globe, has invested in Dutch equipment maker ASML (ASML.N). The company makes systems that can produce highly ultraviolet (EUV) light lithography equipment, a crucial tool for producing advanced computer chips in smaller and smaller sizes. The newest chip production processes use EUV technology, which provides higher resolution than previous techniques.
The U.S. government’s new approval for TSMC to use EUV equipment in its China plant means the firm can continue scaling up production in the face of increasing demand and boosting profitability at the same time. The move also removes a significant hurdle for the company and other global chipmakers that plan to use the technology in their factories in China. Reuters reported this week that the Biden administration is continuing to tighten up export restrictions on other key chip technologies to cut off Chinese access, including closing a loophole that allows some companies to access American artificial intelligence (A.I.) chips through overseas units. This limits the development of China’s own A.I. chipmaking capabilities, which could give it a technological edge over rivals such as the United States, Japan, and South Korea.
