Stricter U.S. Rules on Chip Exports to China: Implications for TSMC, Samsung, and Intel

Taiwan Semiconductor Manufacturing Co (TSMC), Samsung Electronics (Samsung), and Intel Corp (Intel) are likely to encounter more stringent export rules as the U.S. government deepens its efforts to limit China’s access to advanced semiconductor technology. This initiative is largely driven by national security concerns.

The Biden administration is preparing to introduce new measures that encourage semiconductor manufacturers to conduct thorough analyses and due diligence on their clients. According to anonymous sources familiar with the matter, these measures are a response to the previous incidents where chips manufactured by TSMC were reportedly found in the hands of banned entities such as Huawei Technologies Co.

Furthermore, upcoming sanctions—which could be announced soon—might restrict Nvidia Corp's sales of AI chips, along with those of other competitors, to countries that are not aligned with the U.S., specifically targeting nations like China and Russia.

The proposed regulations may involve a ban on the export of advanced chips, particularly those that are 16nm or smaller, and a requirement for a government license in order to sell these products to China and similarly restricted countries. By implementing these rules, the U.S. aims to better assist chip manufacturers in identifying which designs and customers may be affected by U.S. semiconductor sanctions.

The primary focus of these efforts will be on sophisticated processors, especially AI accelerators developed by Chinese firms. This is part of a broader strategy where the U.S., along with its allies—including Europe and Japan—has increased its attention on domestic semiconductor production to minimize reliance on China. This shift was prompted by the disruptions caused by the global pandemic in 2020.

Since then, the U.S. has initiated actions to restrict China’s access to advanced semiconductor technologies, asserting that such technology could bolster China’s military capabilities. Moreover, there has been notable encouragement from the U.S. for its allies, like Taiwan and the Netherlands (home to chip equipment producer ASML Holding), to also curb semiconductor trade with China.

At present, TSMC holds a commanding 64% share of the global foundry market, with Samsung reflecting a distant second at 12%, boosted by its advancements in 4nm and 5nm processing technologies. Investors looking for exposure in this sector might consider the VanEck Semiconductor ETF or iShares Semiconductor ETF to diversify their portfolios.

Price Action: TSMC's stock recently saw a slight increase, closing at $201.97 in premarket trading.

semiconductors, exports, regulations