U.S. pulls TSMC’s waiver for China shipments of chip supplies

American officials recently informed TSMC of their decision to end the Taiwanese chipmaker’s so-called validated end user, or VEU, status for its Nanjing site. The action mirrors steps the U.S. took to revoke VEU designations for China facilities owned by Samsung Electronics Co. and SK Hynix Inc. The waivers are set to expire in about four months. 

Washington’s move means that TSMC, Samsung and SK Hynix’s suppliers will have to apply for individual approvals when they want to ship semiconductor equipment and other gear covered by U.S. export controls to the affected China facilities, instead of the blanket authorization those suppliers currently have because of the plants’ VEU status. 

TSMC’s shares slid as much as 1.3% in Taipei, while suppliers including Tokyo Electron Ltd. fell about 2%. 

“TSMC has received notification from the U.S. government that our VEU authorization for TSMC Nanjing will be revoked effective Dec. 31, 2025,” the company said in a statement. “While we are evaluating the situation and taking appropriate measures, including communicating with the U.S. government, we remain fully committed to ensuring the uninterrupted operation of TSMC Nanjing.”

The revocation adds new hurdles to the China operations of some of the most important companies in the semiconductor sector, hailing from two chipmaking powerhouses that are also U.S. allies. While U.S. officials have said they intend to issue licenses needed to keep those facilities operational, the shift introduces some uncertainty about wait times to actually secure those permits. In a statement, Taiwan’s Ministry of Economic Affairs said that revocation of the U.S. waiver would impact the predictability of the Nanjing plant’s operations. 

Officials are currently working on solutions to ease the bureaucratic burden, people familiar with the matter said, particularly given a significant volume of existing license requests. Revoking Samsung and SK Hynix’s VEU status, for example, will require U.S. officials to process an additional 1,000 permits annually, according to a federal notice. 

Compared with Samsung and SK Hynix, which house a sizable share of their production in China, TSMC’s manufacturing footprint in the world’s second-largest economy is relatively small. The company’s Nanjing site began production in 2018 and contributed a small fraction of TSMC’s total revenue last year—and roughly 3% of the company’s overall production capacity, according to the Taiwanese ministry. 

The U.S. move will not affect the competitiveness of Taiwan’s chip industry, the ministry said. The campus in question houses technology as advanced as the 16-nanometer process, which first became commercially available more than a decade ago.

The situation highlights the extent of Washington’s influence in, and control over, the supply chain for electronic components that power everything from microwaves to phones to data centers training artificial intelligence algorithms—even when the plants in question are operated by three non-American companies in a foreign country. 

The U.S. has broadly limited China’s access to materials and equipment that could be used to make advanced chips, part of a suite of controls designed to limit the Asian nation’s AI prowess. The export curbs affect sales not just to Chinese companies, but any facilities that are physically within the country—including Samsung, SK Hynix and TSMC’s plants. 

Under President Joe Biden’s administration, the trio of companies secured an indefinite waiver to continue making shipments to their China facilities, so long as they comply with security requirements and disclose certain information to the U.S. government. That VEU designation—which U.S. officials announced for Samsung and SK Hynix, and which TSMC publicized in an annual report—was a top priority for the chipmakers and foreign government officials, given that semiconductor plants require regular imports of everything from spare parts to chemicals.

Losing the waivers introduces some uncertainty for top suppliers to TSMC, Samsung and SK Hynix—including machinery companies like Applied Materials Inc., ASML Holding NV, Tokyo Electron and KLA Corp. ASML declined to comment, while Applied Materials had no immediate comment. KLA and Tokyo Electron didn’t respond to requests for comment.

Shares of Applied Materials and KLA fell in New York trading on Tuesday, as did depositary receipts for ASML, with losses outpacing declines in the broader market. 

The Commerce Department’s Bureau of Industry and Security, which oversees semiconductor export controls, announced its VEU decision for the two South Korean companies last week, saying that the U.S. was closing “export control loopholes” that put American companies “at a competitive disadvantage.” 

The agency also formally rescinded Samsung and SK Hynix’s VEU status in the federal register, a public account of U.S. regulations—and they did the same for a VEU designation given to Intel Corp., for a facility in Dalian, China, that SK Hynix has since acquired. BIS did not respond to a request for comment about TSMC’s waiver being revoked. 

Because TSMC’s VEU status was never published in the federal register in the first place, there was not a public regulation for BIS to amend in the same way as for the other affected companies. All told, though, the net effect on TSMC, Samsung and SK Hynix’s waivers is the same.