The Impact of Revoked US VEU Waivers on TSMC and Semiconductor Supply Chains

The U.S. government’s revocation of TSMC’s Validated End-User (VEU) status for its Nanjing, China, facility marks a pivotal moment in the global semiconductor industry. Effective December 31, 2025, this move requires U.S. suppliers to apply for individual export licenses for shipments to the site, replacing the previous blanket authorization [1]. While the Nanjing plant contributes only 2.4–3% of TSMC’s total revenue, the broader implications for supply chain resilience, geopolitical risk, and investor sentiment are profound. This analysis explores the strategic risks and opportunities for semiconductor suppliers and investors in the wake of these regulatory shifts.

Strategic Risks for TSMC and Its Suppliers

The revocation introduces operational uncertainty for TSMC’s Nanjing facility, which produces older-generation 16-nanometer chips. According to a report by Bloomberg, the U.S. Commerce Department has clarified that licenses will be granted to sustain current operations but not to enable capacity expansion or technology upgrades [2]. This restriction aligns with the Biden administration’s broader strategy to curb China’s access to advanced semiconductor technology, mirroring similar actions against Samsung and SK Hynix [3].

For TSMC’s suppliers, the administrative burden of securing individual licenses could delay shipments and disrupt production timelines. Data from Reuters indicates that the U.S. government now faces an additional 1,000 annual license requests, a logistical challenge that could exacerbate bottlenecks [4]. While TSMC has emphasized its commitment to maintaining uninterrupted operations, the company’s ability to navigate these hurdles will depend on its communication with U.S. regulators and its capacity to absorb potential delays.

Broader Industry Implications and Supplier Responses

The ripple effects extend beyond TSMC. ASML, the Dutch lithography giant, anticipates that updated U.S. export restrictions will impact its China business, which accounts for 20% of its 2025 net sales. However, the company remains optimistic about its EUV growth trajectory, projecting a 30% sales increase driven by AI and high-performance computing demand [5]. Similarly, Applied Materials, a key supplier of chipmaking tools, reported a 7% year-over-year revenue growth in Q2 2025 but warned of weak China demand and erratic orders [6]. The company is mitigating risks through R&D investments in AI-specific tools and expanding its manufacturing footprint to reduce reliance on a single market.

The shift in production dynamics is also reshaping supply chains. As U.S. export controls tighten, companies like Samsung and SK Hynix are accelerating investments in South Korea and Southeast Asia. Vietnam, in particular, has emerged as a strategic hub, attracting $480 million in semiconductor-related capital in recent months [7]. This trend underscores the industry’s pivot toward diversification, with Southeast Asia’s low labor costs and U.S.-friendly policies making it an attractive alternative to China.

Investor Sentiment and Stock Performance

The market has reacted cautiously to these developments. TSMC’s stock dropped 2% following the VEU revocation, while suppliers like Applied Materials and KLA also saw declines [8]. However, the PHLX Semiconductor Index (SOX) has shown resilience, rising 13.8% year-to-date in late summer 2025, driven by AI-driven demand and next-generation process technologies [9].

Investor sentiment is further influenced by geopolitical uncertainties. The EU’s Chips Act, which prioritizes AI-focused innovation, offers a counterbalance to U.S.-China tensions, attracting capital to European semiconductor firms [10]. Meanwhile, U.S. firms like Nvidia and AMD face revenue losses from China restrictions—Nvidia alone absorbed a $5.5 billion hit in 2025—but are adapting by developing China-compliant products such as the B30 AI chip [11].

Opportunities in Diversified Supply Chains

The crisis has also created opportunities for investors. Southeast Asia’s manufacturing renaissance, supported by integrated supply chains for EV semiconductors and battery production, is attracting significant capital. Thailand and Indonesia are emerging as key players, while the EU’s strategic initiatives provide additional avenues for growth [12].

For semiconductor suppliers, the focus is shifting toward innovation and resilience. ASML’s High-NA EUV systems, which are critical for next-generation chip production, are projected to triple in sales by 2025 [13]. Applied Materials’ $4 billion EPIC Center, set to open in 2026, positions the company to lead in 3nm and sub-3nm manufacturing [14]. These investments highlight the sector’s long-term potential despite short-term regulatory headwinds.

Conclusion

The revocation of U.S. VEU waivers represents a strategic recalibration of global semiconductor supply chains. While TSMC and its suppliers face immediate operational and regulatory challenges, the industry’s pivot toward Southeast Asia and South Korea offers long-term opportunities. Investors must balance short-term risks—such as supply chain bottlenecks and geopolitical tensions—with the potential for innovation-driven growth in AI, advanced packaging, and next-generation lithography. As the sector navigates this complex landscape, companies that prioritize diversification, R&D, and regulatory agility will likely emerge as leaders.

Source:
[1] US Pulls TSMC's Waiver for China Shipments of Chip Supplies [https://finance.yahoo.com/news/us-pulls-tsmc-waiver-china-203406976.html]
[2] U.S. Curbs TSMC's Shipments of Chip Supplies to China [https://www.wsj.com/tech/u-s-curbs-tsmcs-shipments-of-chip-supplies-to-china-e7c34899]
[3] US revokes TSMC's authorisation on China-bound tech [https://www.bbc.com/news/articles/creve4x8drgo]
[4] U.S. Makes It Harder for TSMC, SK Hynix, Samsung to Make Chips in China [https://www.cnbc.com/2025/09/03/us-makes-it-harder-for-tsmc-sk-hynix-samsung-to-make-chips-in-china.html]
[5] ASML Sees 30% EUV Growth in 2025 [https://www.theglobeandmail.com/investing/markets/stocks/AMAT/pressreleases/34394715/asml-sees-30-euv-growth-in-2025-is-demand-sustainable-through-2026/]
[6] Applied Materials Announces Second Quarter 2025 Results [https://ir.appliedmaterials.com/news-releases/news-release-details/applied-materials-announces-second-quarter-2025-results]
[7] Assessing the Impact of U.S. Export Controls on Samsung [https://www.ainvest.com/news/assessing-impact-export-controls-samsung-sk-hynix-strategic-opportunities-semiconductor-investors-2509/]
[8] US Revokes TSMC's China Shipment Status—And Shares Drop [https://www.forbes.com/sites/tylerroush/2025/09/02/chip-giant-tsmc-shares-drop-2-after-us-revokes-waiver-for-china-shipments/]
[9] Semiconductor Stock Forecast for the Rest of 2025 [https://money.usnews.com/investing/articles/semiconductor-stock-forecast-for-the-rest-of-2025]
[10] EU-US Trade Deal Sends Euro Zone Investor Sentiment Plummeting [https://www.reuters.com/world/europe/eu-us-trade-deal-sends-euro-zone-investor-sentiment-plummeting-2025-08-04/]
[11] Assessing the Impact of U.S. Export Control Shifts on Global Semiconductor Supply Chains [https://www.ainvest.com/news/assessing-impact-export-control-shifts-global-semiconductor-supply-chains-2508/]
[12] Capital Reallocation and Southeast Asia's Manufacturing Renaissance [https://www.ainvest.com/news/capital-reallocation-southeast-asia-manufacturing-renaissance-era-opportunity-2509/]
[13] ASML Poised for AI-Fueled Rebound as EUV and High-NA Demand Surges [https://www.spglobal.com/market-intelligence/en/news-insights/research/asml-poised-for-ai-fueled-rebound-as-euv-and-high-na-demand-surges]
[14] Applied Materials' Strategic Position in the Evolving Semiconductor Landscape [https://www.ainvest.com/news/applied-materials-strategic-position-evolving-semiconductor-landscape-2508/]