chip war escalates: us clamps down on tsmc's china operations
Washington, Thursday, 4 September 2025.
the united states is tightening the screws on china’s semiconductor industry. tsmc, sk hynix, and samsung face tougher restrictions on exporting chipmaking equipment to their chinese plants. this move curtails waivers, impacting operations and potentially slowing china’s chip advancements. the decision underscores ongoing concerns about technology transfer and national security. tsmc’s nanjing fab contributes less than 3% to its total revenue. the us move reflects washington’s broader strategy to control semiconductor equipment and tech exports to china, strengthening its influence over chip production.
tsmc’s response and market reaction
TSMC has acknowledged the receipt of the notification from the U.S. government regarding the revocation of the validated end user authorization for its Nanjing plant, effective december 31, 2025 [1]. The company stated it is evaluating the situation and communicating with the U.S. government [1]. TSMC affirmed its commitment to ensuring uninterrupted operations at its Nanjing facility [1]. Despite these developments, TSMC’s shares traded flat on september 3, 2025, indicating a muted immediate market reaction to the news [1].
broader implications for semiconductor industry
The U.S. Department of Commerce’s Bureau of Industry and Security said that it was closing the VEU “Biden-era loophole” for all foreign semiconductor manufacturers [1]. Under Secretary of Commerce for Industry and Security Jeffrey Kessler stated the U.S. is committed to closing export control loopholes, especially those disadvantaging U.S. companies [1]. Brady Wang, associate director at Counterpoint Research, views this as a move to tighten control over semiconductor equipment and technology exports to China, strengthening U.S. power over chip production [1]. These restrictions may impact the expansion of supply chains in China, particularly in the semiconductor sector [1].
assessing the impact on tsmc’s manufacturing capacity
TSMC operates two manufacturing sites in China, located in Shanghai and Nanjing [1]. The Nanjing fab accounts for less than 3% of TSMC’s total revenue [1]. The Taiwan Ministry of Economic Affairs believes the restrictions on the Nanjing plant will not significantly impact the overall competitiveness of Taiwan’s semiconductor industry [5]. While the U.S. intends to issue licenses for existing facilities in China, it does not plan to approve licenses for expanding capacity or upgrading technology [5]. This suggests a long-term strategy to limit advanced chip manufacturing capabilities within China [1].
geopolitical considerations and ai chip exports
Ray Wang, research director at Futurum Group, suggests the U.S. aims to constrain companies’ ability to expand their supply chain footprint in China, especially in strategic sectors like semiconductors [1]. Previously, the U.S. eased controls on exporting some American AI chips to China [1]. However, the Trump administration struck down the Biden-era AI diffusion rule [1]. On august 12, 2025, the U.S. announced nvidia and amd could resume exports of some previously banned ai chips [1]. These fluctuating policies highlight the complex geopolitical considerations influencing semiconductor trade and technology [alert! ‘impact of AI chip exports on TSMC not specified in source’].