US Revokes Semiconductor Company VEU Qualification: Global Supply Chain Impact Analysis

The U.S. government recently officially notified TSMC that it will revoke its “Verification End User” (VEU) qualification for its Nanjing plant in China. This move means that every import of U.S. equipment to TSMC's Nanjing plant will require individual approval, and it will no longer enjoy the convenience of not having to apply for permits on a case-by-case basis. This decision caused TSMC's American Depositary Receipts (ADR) to fall by 1.07%, and TSMC's (2330.TW) stock price also slightly dropped by 10 NTD in early trading, reporting at 1145 NTD.

TSMC subsequently issued a statement confirming that it has received notification from the U.S. government that the current VEU authorization will officially terminate on December 31, 2025. The company stated that it is assessing the relevant impacts and will take responsive measures, including ongoing communication with the U.S. side to ensure that operations at the Nanjing plant are not interrupted.

It is worth noting that the decision by the U.S. Bureau of Industry and Security (BIS) is not solely aimed at TSMC. The BIS had previously revoked the VEU qualification of Korean semiconductor companies such as Samsung and SK Hynix, indicating that the U.S. is further tightening its equipment control policies on the Chinese semiconductor industry. This series of measures will require relevant companies to apply for licenses on a case-by-case basis, increasing operational uncertainty.

Capacity Impact Analysis

From the perspective of capacity distribution, TSMC's Nanjing factory mainly produces 16-nanometer process chips, accounting for about 3% of its global total capacity, which is relatively limited. In contrast, Samsung and SK Hynix's capacity share in China is approximately 20% and 40% respectively, indicating a significantly larger impact. Specifically:

This data comparison clearly illustrates the varying degrees of impact that the revocation of VEU qualifications has on different companies. Although TSMC's Nanjing plant has a relatively small production capacity, the importance of the 16nm process in certain specific application areas, such as some IoT devices and mid-to-low-end smartphone chips, may still have a certain impact on the global supply chain.

In-Depth Impact Analysis

1. Supply Chain Restructuring: The revocation of VEU eligibility may accelerate the restructuring of the global semiconductor supply chain. Some companies may consider shifting more capacity to the United States or other friendly countries to avoid potential trade restrictions.

2. Technical development is restricted: For Chinese semiconductor manufacturers that rely on American equipment, this move may make it difficult for them to timely acquire the latest production equipment, which in turn affects their technology upgrade and capacity expansion plans.

3. Changes in Market Competition Landscape: The Chinese market accounts for about one-third of global semiconductor demand, and changes in relevant policies may lead to a redistribution of market share, affecting the competitive landscape of global semiconductor companies.

4. Potential Impact on the Cryptocurrency Industry: Changes in the semiconductor supply chain may indirectly affect the supply of cryptocurrency mining hardware. In particular, ASIC miners that rely on specific process chips may face rising costs or supply shortages.

Conclusion

Overall, the recent revocation of VEU qualifications has a relatively limited direct impact on TSMC, and the company's overall competitiveness is not expected to be significantly affected. However, this decision reflects the U.S. government's ongoing tightening of controls over the semiconductor industry, which may have far-reaching effects on the global semiconductor supply chain and related industrial ecosystem. Market participants need to closely monitor subsequent policy directions and their potential impact on the industry landscape.