TSMC Adjusts IC Packaging Policy to Navigate US Restrictions and Mitigate Tariff Risks
TSMC recently modified its IC packaging process arrangements to comply with US chip manufacturing restrictions without giving up all its 16/14 nm advanced chip foundry business in China. Its arrangement for Apple’s M5 chips also minimizes potential tariff costs for the customer.
As part of these adjustments, TSMC has notified its fabless customers—particularly those from mainland China—that shipments of 16/14nm and more advanced process chips will be suspended if the final packaging OSAT (Outsourced Semiconductor Assembly and Test) provider is not on the US Department of Commerce’s Whitelist. According to ICSmart, this especially applies to IC designers who are not yet on the design Whitelist.
TSMC is under significant pressure from the US government, particularly after TechInsights discovered its chips in a Huawei processor. Two of TSMC's IC design customers, Sophgo and PowerAIR, were allegedly involved in a “white glove” operation, acquiring TSMC chips and transferring them to Huawei. As TSMC navigates the tense geopolitical landscape between the US and China, it is compelled to comply with US regulations while attempting to protect its business relationships with legitimate Chinese customers.
To address these challenges, TSMC has devised a strategy to mitigate risks while maintaining business with unaffected Chinese clients. Meanwhile, Korean media outlet ETnews has reported that the M5 chips produced by TSMC will be packaged by three companies: Taiwan's ASE, Amkor in the US, and JCET in China. This decision seems to align with Apple’s strategy, which aims to diversify packaging destinations for various markets to reduce the impact of potential US tariffs on China and China’s retaliatory measures.
As President Donald Trump has announced an additional 10% tariff on imports from China and has threatened to impose tariffs on chips from Taiwan, multinational firms are seen formulating their strategies to navigate the geopolitical risks.
The US chip manufacturing restrictions primarily target China's AI chip development and aim to prevent Chinese companies from bypassing restrictions by using intermediaries, or "white glove" services, to acquire TSMC's advanced chips. This practice involved transferring advanced chips to third-party packaging and testing vendors not on the US Whitelist to produce high-performance computing (HPC) and AI chips.
Currently, the OSATs on the US Whitelist include Amkor Technology, ASE Technology Holding, Doosan Tesna, and several others. These companies must verify the chips designed by non-whitelisted firms before exporting them to China. Specific conditions are set for export, re-export, or transfer based on transistor counts and the inclusion of high bandwidth memory (HBM). For example, packaged ICs with fewer than 30 billion transistors or those that do not contain HBM can be exported without restriction.
In January, TSMC’s CEO, C.C. Wei, addressed the issue during the company's Q4 2024 earnings conference. He reassured analysts that TSMC is applying for special permits on behalf of Chinese customers impacted by the restrictions. Wei expressed confidence that these customers would receive approval, particularly for industries outside of AI, such as the automotive sector or crypto mining.
As TSMC continues to navigate the complexities of global trade regulations, its approach to diversifying packaging providers and complying with US restrictions underscores its efforts to balance regulatory pressures with customer needs. Whether these strategies will alleviate the challenges posed by the evolving geopolitical landscape remains to be seen, but TSMC's adaptability could prove crucial in maintaining its position at the forefront of the semiconductor industry.
The fabless firms on the Whitelist include: AMD, Alphabet, Amazon, Analog Devices, Apple, BAE Systems, Block, Boeing, Broadcom, Cerebras Systems, Cisco Systems, Hewlett-Packard Enterprise Company, Honeywell International, Infineon Technologies AG, Intel, IBM, L3Harris Technologies, Marvell Technology, MediaTek, Meta Platforms, Micron Technology, Microsoft, Mitsubishi, Nokia, Nvidia, NXP, Qualcomm, Ratheon, Realtek, Sony, Tesla, TI and Western Digital.
Those OSATs that are currently on the Whitelist include: Amkor Technology, Ardentec Corporation, ASE Technology Holding, Doosan Tesna, Fabrinet, Giga Solution Tech, GlobalFoundries, HT Micron Semiconductors SA, Intel Corporation, IBM, KESM Industries Berhad, LB Semicon, Micro Silicon Electronics, Nepes Corporation, Powertech Technology Inc, QP Technologies, Raytek Semiconductor, Samsung Electronics, SFA Semicon, Shinko Electric Industries, Sigurd Microelectronics Corporation, TSMC and UMC.
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