TSMC on Thursday has confirmed that it had stopped processing new orders from Huawei back on May 15th. The news is the first official statement from the company on the matter, since the US Commerce Department’s expansion of rules to require licenses for sales to Huawei of semiconductors which us US technology.

Under the rule change, Taiwan based TSMC is not allowed to sell to Huawei silicon products unless the Chinese vendor receives (an unlikely) license from US regulators. Huawei and TSMC had been given a 3-months grace period in which existing orders were allowed to be processed and shipped. TSMC yesterday has confirmed that the manufacturer does not plan to ship any wafers to Huawei or HiSilicon after September 14th.

It’s been wildly speculated that Huawei had been pre-empting the US ban and making very large orders to TSMC to be able to have a sufficient silicon supply for the rest of the year. However, once this stock runs out and if the political situation hasn’t been resolved by then, it would mean big troubles for the Chinese vendor. Beyond Huawei’s consumer business segment which had grown to be the #2 smartphone vendor in the world, behind Samsung and ahead of Apple, Huawei is an important player in the cellular infrastructure market where they are currently the leading player for telecommunications equipment.

HiSilicon is also a big player in the DTV SoC market, IP camera SoC market, and most recently an entrant in the server CPU market with their in-house Kunpeng 920 chip and custom microarchitecture. Without means to manufacture their designs, it leaves the company in a precarious situation. Other semiconductor foundries are also unlikely to be able to pick up Huawei as a customer as they all use US-made equipment. In theory, even Shanghai based SMIC would be banned from supplying Huawei – in practice we haven’t heard any confirmation on the situation there yet.

As for TSMC, Huawei represented the manufacturer’s biggest customer with a 23% revenue share in 2019. Surprisingly enough, the company states that the Huawei ban is unlikely to have an effect on the company’s revenues, with other customers being able to pick up coveted manufacturing capacity. The company even forecasts 20% year-on-year growth for the July-September period, and is further increasing its capital expenditure for the year to up to $17bn.

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Source: Nikkei Asia

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  • s.yu - Saturday, July 18, 2020 - link

    In fact IIRC China already has EUV, announced about a year ago, but it could only be used for flash.
  • nrlz - Tuesday, July 21, 2020 - link

    China is using older machines for the EUV. Not the latest tech.
  • s.yu - Saturday, July 18, 2020 - link

    Don't count on SMIC in the near term, more than 50% of their raw material(that require precision chemistry) is imported from Japan, SK, the US or EU. If they're found out to be fabbing for Huawei(which is inevitable, it's consumer electronics that at least hundreds of Youtubers will take apart under camera), they will face sanctions.
  • brucethemoose - Saturday, July 18, 2020 - link

    Thats very interesting. A sanction would be a pretty bold stab at China, as I don't imagine SMIC has many customers outside of China's orbit.
  • azfacea - Saturday, July 18, 2020 - link

    SMIC will be attacked sooner or later regardless of what they do or don't for Huawei. I suspect China is making a huge effort to gain supply chain independence in semi, right now as we speak but that will take many years to for example drop ASML and be fine. more likely though China will pressure Washington with carrots and sticks (corn purchase, Iran 400 billion deal, maybe even arm shipments ) to get trump to back down. he has made a phase 1 deal in the past he could do another. I think every one is waiting for Nov 3 right now
  • brucethemoose - Sunday, July 19, 2020 - link

    Some kind of trade deal is going to happen before Nov 3.

    Either that, or relations are going to deteriorate to the point that any candidate will have trouble regaining lost ground.
  • s.yu - Monday, July 20, 2020 - link

    ASML? A decade at the very least. For the moment they can't even solve high purity fluorine, which was also an issue SK faced when Moon tried to blackmail Japan with historical issues settled by treaties. The quality required for advanced nodes is produced nowhere but Japan.
    That said, I don't believe SMIC's an immediate target, because to get concessions out of the Party, Huawei is enough, and SMIC is too small a figure in the industry. SMIC will no doubt receive strong policy support so I suppose the apparent importance of SMIC as estimated by the Party's extent of non-market support to them will be a gauge of the risk that they will be targeted in the future.
  • azfacea - Monday, July 20, 2020 - link

    I agree and disagree. I dont think it takes a decade. i think 5 years is enough for full semi independence depending how seriously they pursue it. its not harder than hypersonics or hydrogen bombs with 50s and 60s technology. but I already said semi conductor supply chain is complicated and will take many years. which is why i think they will seek a deal with US but are waiting for the election outcome.

    I think the recent news of 400 billion deal between china and iran was mostly to generate leverage against Washington. i dont think china actually plans to go ahead with it.
  • s.yu - Monday, July 27, 2020 - link

    Well what do you mean by serious then? AFAICT they burn tens of billions annually and for the past decade failed to make any significant progress on CMOS...I'm not aware of China's lithography being competitive with Canon and Nikon at the moment, and I think it's safe to say that Canon and Nikon, if they were to try, need more than half a decade to reach where ASML is today.

    Hmm, the Party definitely needs leverage against Washington, because even Russia refuses to be that leverage, but I have no idea how they plan "not to go ahead with it".
  • alufan - Monday, July 20, 2020 - link

    Am really not understanding on what level TSMC has to stop supplying a Customer, are TSMC not an independent company carrying out free Trade with others, how can the Government of a foreign Country decide who an independent Company can and cannot trade with can someone explain this to me, it just stinks of blatant protectionism to keep US companies on Top and just shows how Apple manages to get away with so much.

    All this will do is spur the Chinese on to greater things, you watch when the rest of the world is taking enough product the Chinese will stop all shipments to the US of everything and start selling US stock at a loss they have the money and the infrastructure to do it

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