BIS Imposes Export Controls on TSMC N7 and Below Chips, Impact Expected to Be Limited

[Daniel Nenni]

New Export Restrictions Target Advanced Semiconductor Nodes, Minimal Disruption Anticipated for TSMC
It is rumored in the market that some Chinese customers have obtained advanced process chips before the restrictions, which is why the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) is requiring TSMC to stop supplying all products below the N7 process to Chinese customers.

According to our understanding, the BIS has not yet formally issued an order, so TSMC is expected to avoid penalties by proactively complying with BIS export control regulations. TSMC will likely increase its level of scrutiny on Chinese AI businesses, and the new regulations are expected to take effect on November 11. Once the new regulations begin, N7 and below products may temporarily cease supply to Chinese customers. This is expected to have the greatest impact on HPC/AI and related products, while other consumer products should still be available to China as long as they comply with BIS’s conditions.


We believe TSMC will not be significantly affected in the short term. China’s revenue accounted for 12% of TSMC’s revenue in 2023, and we estimate a decline of less than 10% in 2024. Additionally, TSMC’s AI revenue from China is estimated to account for no more than 3% of total revenue in 2024, and this ratio may further decline by 2025.



This is because most of TSMC’s AI revenue comes from U.S. customers. Therefore, we remain cautiously optimistic about TSMC’s future growth and believe that the U.S. will remain TSMC’s main growth driver.



IP/IC design service companies face primarily limited risks from the latest export controls on China, focusing mainly on mature manufacturing processes with no direct impact.

The new wave of export controls on China may affect AI applications, particularly in HPC and related fields. Taiwanese IC design companies generally concentrate on mature processes, and their revenue exposure to China has already been gradually reduced since the 2023 export controls. For example, GUC and Alchip focus on industrial and network applications for China, with the majority of their sales in N12 and above processes. Therefore, the impact of the new regulations is expected to be minimal. According to Alchip, its revenue from China has recently decreased to about 10%, with only specific HPC-related projects, such as ADAS, potentially facing a negative impact.

Overall, we believe the IC design service industry will experience minimal impact, although there may be some influence on their Chinese orders. As for IP vendors, the new regulatory measures are expected to bring no direct impact in the short term. However, if design houses are restricted from shipping to China due to stricter regulatory compliance, they may face indirect impacts.

BIS Imposes Export Controls on TSMC’s N7 and Below Chips, Impact Expected to Be Limited

New Export Restrictions Target Advanced Semiconductor Nodes, Minimal Disruption Anticipated for TSMC

tspasemiconductor.substack.com

 

[samwilde]

That 12% is without HiSilicon, Pythium, Biren, and other Chinese chip companies which used to be TSMC customers.

SMIC used to have difficulty finding customers for its 28nm and FinFET processes. Their FinFET fab was frozen at 35,000 wpm for years and kept operating under capacity. Part of this was due to TSMC opening fabs in China and thus Chinese customers were able to sell chips made there and pass them as "Made in China" to the PRC government. So few customers wanted to risk having lower yields and chip performance at SMIC. Thanks to the US sanctions now SMIC have managed to expand their FinFET fab space to be able to do 70,000 wpm. Since their whole operations are at over 90% capacity I doubt the SMIC FinFET fab isn't operating close to capacity as well.

These sanctions, if the claim that PRC clients can no longer fab at 7nm and beyond at TSMC is true, mean chips like the latest ADAS made by Horizon Robotics, the Journey 6, can no longer by fabbed at TSMC. I think Horizon Robotics currently sell like two million ADAS chips per year. And you can pretty much expect that every car in China will eventually be an EV and get ADAS. China manufactures around 30 million cars per year.

 

[hist78]

New Export Restrictions Target Advanced Semiconductor Nodes, Minimal Disruption Anticipated for TSMC
It is rumored in the market that some Chinese customers have obtained advanced process chips before the restrictions, which is why the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) is requiring TSMC to stop supplying all products below the N7 process to Chinese customers.

According to our understanding, the BIS has not yet formally issued an order, so TSMC is expected to avoid penalties by proactively complying with BIS export control regulations. TSMC will likely increase its level of scrutiny on Chinese AI businesses, and the new regulations are expected to take effect on November 11. Once the new regulations begin, N7 and below products may temporarily cease supply to Chinese customers. This is expected to have the greatest impact on HPC/AI and related products, while other consumer products should still be available to China as long as they comply with BIS’s conditions.


We believe TSMC will not be significantly affected in the short term. China’s revenue accounted for 12% of TSMC’s revenue in 2023, and we estimate a decline of less than 10% in 2024. Additionally, TSMC’s AI revenue from China is estimated to account for no more than 3% of total revenue in 2024, and this ratio may further decline by 2025.



This is because most of TSMC’s AI revenue comes from U.S. customers. Therefore, we remain cautiously optimistic about TSMC’s future growth and believe that the U.S. will remain TSMC’s main growth driver.



IP/IC design service companies face primarily limited risks from the latest export controls on China, focusing mainly on mature manufacturing processes with no direct impact.

The new wave of export controls on China may affect AI applications, particularly in HPC and related fields. Taiwanese IC design companies generally concentrate on mature processes, and their revenue exposure to China has already been gradually reduced since the 2023 export controls. For example, GUC and Alchip focus on industrial and network applications for China, with the majority of their sales in N12 and above processes. Therefore, the impact of the new regulations is expected to be minimal. According to Alchip, its revenue from China has recently decreased to about 10%, with only specific HPC-related projects, such as ADAS, potentially facing a negative impact.

Overall, we believe the IC design service industry will experience minimal impact, although there may be some influence on their Chinese orders. As for IP vendors, the new regulatory measures are expected to bring no direct impact in the short term. However, if design houses are restricted from shipping to China due to stricter regulatory compliance, they may face indirect impacts.

BIS Imposes Export Controls on TSMC’s N7 and Below Chips, Impact Expected to Be Limited

New Export Restrictions Target Advanced Semiconductor Nodes, Minimal Disruption Anticipated for TSMC

tspasemiconductor.substack.com

China market contributed about 46% of Qualcomm revenue and 27% of Intel revenue a year. The future trend is not going better for both companies.

 

[siliconbruh999]

Qualcomm is just too much China Dependent Half of the revenue Intel's is 1 quarter of revenue both are lot pretty sure same with other companies

 

[Barnsley]

Qualcomm is just too much China Dependent Half of the revenue Intel's is 1 quarter of revenue both are lot pretty sure same with other companies

Then they are going to have to cut their cloth accordingly then.

Have to get down to doing some hard work in convincing folk to use their product.

Maybe shouldnt have placed all their eggs in the China basket?

Not very forward thinking by management.