Washington’s export controls limit TSMC from expanding its fab in Nanjing, China, potentially shifting business to local chipmakers like SMIC and Hua Hong. That's according to Sravan Kundojjala of SemiAnalysis, who told TaiwanPlus that the Nanjing plant contributes a small but strategically important share of TSMC's revenue. The facility produces mature 16- and 28-nanometer chips used in smartphones, automotive systems and industrial devices, markets where demand remains high.
00:00Now that Washington has decided to cut off TSMC from U.S. chip making tools for its facilities in Nanjing, China, what might be the impact on TSMC and the chip industry in China?
00:13The decision definitely cripples Chinese fabulous ecosystem by taking out a big company's presence within China, by limiting TSMC from expanding its capacity in China.
00:28In terms of capacity, revenue and profit, that FAB contributes to low single digit percentage of TSMC's revenue.
00:37But I think if you look at a broader picture, actually, it's a strategic FAB for TSMC to operate in China because there are thousands of fabulous companies in China.
00:47I think it's very important for TSMC to capture all of that opportunity with Chinese companies and be a provider to them.
00:55So now the bigger question mark is what will happen to the China for China strategy, right?
01:02I mean, China has mandated that, you know, the production has to happen within China.
01:08If TSMC is not able to get equipment, it's not able to expand the capacity, that business will now go to some of the local FABs, SMIC, Wahang, you know, these companies and potentially to Huawei.
01:21There's been a lot of focus on TSMC's overseas FABs in Arizona, in Japan, but what kind of products is this Nanjing facility making?
01:31For Nanjing FAB, TSMC makes 28 nanometer and 16 nanometer based chips.
01:36So basically, these chips go into smartphones, Wi-Fi, think of them like connectivity, Wi-Fi, Bluetooth, RF transceivers.
01:47On the automotive side, yeah, you have various power management chips and image sensors and some of the, you know, industrial type of applications, IoT type of applications, wearables and digital TV sources, things like this.
02:03So it's not like cutting-edge data center or cutting-edge smartphone or AI processor, but if you look at the global demand in terms of wafers, I mean, mature node is still, you know, more than two-thirds of wafer demand.
02:20But in terms of revenue, you know, advanced node is like, it's a big contributor, but in terms of raw volume, if you look at mature node is still fairly significant.
02:30What do you think this latest move says about U.S. export control strategy moving forward, and how should companies like TSMC prepare?
02:39Yeah, it's definitely they are doubling down on, you know, on export controls, and this definitely closes the loophole they previously had.
02:50But, you know, I think TSMC has to operate within these constraints, and they have to satisfy the government requirements.
02:58Even if they lose some of the share to competitors, I think they should be okay.
03:02I mean, if you look at TSMC's broader revenue split picture, right, almost three-fourths of the revenue is advanced nodes, right?
03:11So that's where most of the profits are, that's where most of the opportunity for them.
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