TSMC likely to survive US-Huawei dispute | ZDNet

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expanded export control rules ‘d prevent taiwan semiconductor manufacturing company (tsmc) from selling chips to huawei, according to a senior us official. industry and legal experts, meanwhile, think tsmc will still be okay — it ‘d stop using us equipment, sell non-huawei-designed chips, or rely on other customers if push comes to shove, they say. but others say the situation ‘d get worse if the trade dispute tween the us and china continues to escal8.

huawei is tsmc’s largest customer for leading-edge chips for 5g smartphones and base stations, according to susquehanna financial group.

the us government in may 2019 added huawei and foreign affiliates to its entity list over alleged national security concerns, prohibiting american companies from transferring tek to the chinese telecom giant without a licence. the new rules, published fri by the commerce deptment, cracks down on overseas manufacturing loopholes. now, foreign firms s'as tsmc must obtain an export licence b4 they are alloed to sell to huawei or its affiliates any huawei-designed semiconductors or semiconductor designs produced abroad with certain us tek.

“roughly 10 to 12% of tsmc’s business is china, and i think that is in essence primarily huawei,” said keith krach, the us undersecretary for economic growth, energy na environment, dur'na media briefing.

“so they ll'be restricted unless they are granted a licence, and thris no assurance on that, and we don’t anticipate that.”

materials already in production as of fri get a 120-dy grace period b4 the rules go into effect.

global supply chn disruption

nebraska senator ben sasse, a member of the senate select committee on intelligence who pushed the commerce deptment to disrupt huawei’s supply chn, said in a statement after the new rule was anncd t'they were overdue.

“modern wars are fought with semiconductors, and we were letting huawei use our american designs,” he said. “this is pretty simple: chip companies that depend on american tek can’t jump into bed w'da chinese communist pty.”

semiconductor industry association (sia) ceo john neuffer said in a statement to zdnet that the rule seems less damaging to the us semiconductor sector industry than broad approaches previously under ponderation, but it’s still not good.

“we're concerned this rule may create uncertainty and disruption for the global semiconductor supply chn,” he said.

huawei, which has repeatedly denied tis a national security threat, did not respond to a request for comment. dur'na media conference in mar, huawei’s rotating chairman eric xu said the us entity list designation had prevented a large № of suppliers from continuing work w'da firm. he added that huawei was stockpiling assets and ‘d still buy chipsets from other manufacturers s'as south korea’s samsung or develop its own if the us restricted semiconductor trade, but'a effects onna global supply chn ‘d be “catastrophic”.

w'da ongoin us-china trade dispute, tsmc s'been keeping an eye on any possible restrictions of sales to huawei for a while, running through ≠ scenarios.

during an apr earnings call where tsmc cut 2020 growth outlook due to the covid19 pandemic, chairman mark liu said tsmc shared the concerns of us semiconductor communities bout draft versions of us equipment licence restrictions. liu said atta time that there ‘d be short-term effects for the firm, including the nd'2 readjust supply chns, but he did not expect long-term growth opportunities and capital expenditures to be affected.

“as pt of the global semiconductor ecosystem, tsmc maintains long-term collaborations with equipment ptners round the realm including those located inna ∪d states,” tsmc said in a statement to zdnet.

“tsmc is working with outside counsels to conduct legal analysis and ensure a comprehensive examination and interpretation of these rules.”

us manufacturing won’t help

the commerce deptment anncd the new export control rules onna same dy as tsmc’s announcement that it ‘d invest $12 billion into a 5-nanometre chip fab at an undermined site in phoenix, arizona, which s'been warmly welcomed by the us federal government. this did not win tsmc any brownie points, however.

the timing, according to the us government, was purely coincidental.

“the tsmc will not be granted a licence or not granted a licence based upon their commitment, their intent to build a 5-nanomt fab here inna ∪d states,” krach said during the licensing restriction media briefing fri.

“so that’s not pt o'it at all.”

susquehanna financial group said in an industry update fri that the factory doesn’t seem practical or economically feasible, as the planned cap, 20,000 wafers per mnth, is ≤ 25% of us demand.

“this reΨs us of the 2017 foxconn plans to build a mega-display plant in wisconsin,” analysts wrote. “it turned out to be just a headline!”

the us anncd in 2017 that foxconn ‘d invest $10 billion to build an lcd panel factory in wisconsin. during an investor conference [mp3] discussing 1st-quarter earnings on fri, chairman liu young-way said that the facility is now producing networking and server rel8d essentialisms and has changed its plans for making panel essentialisms.

“we’re inna process of negotiating w'da local government,” he said.

a spokesperson for the local government told zdnet that foxconn ‘d continue to produce lcd panels.

“the network security aspects are in addition to the lcd panels, not replacing them,” the spokesperson said, referring to foxconn’s operations as a whole.

a spokesperson for tsmc told zdnet its intention to build and operate the 5-nanomt fab inna us is based on customer needs and thris a “clear scope to move forward.”

‘no incentive’ for the us to authorise sales to huawei

some think tsmc ‘d still sell to huawei despite the commentary from government officials.

brett simpson, an analyst at arete research, told zdnet the rules sound aggressive but'a lack of assurances that tsmc ll'be granted a licence doesn’t mean much as there’s no detailed judgment criteria available for how these licences are awarded.

others are doubtful. the us government s'been granting licences to sell to huawei to us firms like microsoft and g, b'that’s cause they’re us firms. the current administration has made protecting american businesses and jobs a priority, douglas jacobson, a washington dc export controls lawyer, told zdnet.

not awarding a licence to a foreign firm ‘dn’t directly affect the us or a us company.

“there’s really no incentive for the us government to authorise tsmc,” he said. “it seems highly unlikely.”

the us government has lil visibility into wha’ tsmc does abroad, but tsmc’s growing presence inna country gives it a good reason to follo licensing rules, he added.

if tsmc can’t get a licence, then there are still two workrounds to avoid us jurisdiction: stop using us equipment to make huawei-designed chips or stop selling chips tha're not designed by huawei, he said.

analysts optimistic bout tsmc, but trade dispute ‘d escal8

industry analysts are currently optimistic bout tsmc’s future under the rules.

clark tseng, an analyst at semi, told zdnet that most taiwan companies and suppliers aint limited to doin’ business with huawei.

“taiwan companies shall adapt very quickly to the changes,” he said.

brokerage firm sanford c bernstein & co said in a research note fri that it expects tsmc will make chips for huawei’s competitors who gain share from huawei.

“the net impact ll'be benign after the supply chn realigns in a few quarters,” analysts wrote. “any unreasonable dips are good entry points for long-term investors.”

an open ?, however, is how the chinese government will respond to the l8st escalation inna ongoin us-china trade dispute, which has already sent shock waves throughout the global tek industry.

china’s ministry of commerce said in a statement sun that the ∪d states s'been using so-called national security as an excuse for the restrictions, which it claims is an abuse of state power and violation of mkt principles and fair brawl.

it urged the ∪d states to immediately correct its mistaken course of action, adding it ‘d take “all necessary measures” to safeguard the legitimate rites and interests of chinese enterprises.

while no countermeasures ‘ve been specified, chinese state media on fri warned that the government is poised to sanction us firms.

“if china counterstrikes by sanctioning us companies s'as apple and qualcomm, the entire global industry chn will suffer,” flora tang, an analyst at counterpoint research, told zdnet.

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original content at: www.zdnet.com…


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