TSMC Stock Dips as US Expansion Looms Amid Huawei Supply Halt
1min read Recent developments surrounding Taiwan Semiconductor Manufacturing Co. (TSMC) have captured significant attention, particularly concerning its strategic adjustments following changes in global trade dynamics. TSMC's decision to halt supplying cutting-edge chips to Huawei marked a turning point, underscoring the critical role the Chinese giant played in TSMC's previous revenue streams. The reliance on Huawei became glaringly apparent when capacities, such as their advanced 7nm and 5nm process nodes, experienced an unexpected surplus.
Complicating matters further, US regulations have restricted TSMC from supplying advanced AI chips, leading the company's founder, Morris Chang, to controversially declare the end of globalization as we know it. Despite these challenges, CEO C.C. Wei highlighted progress in the construction of US-based facilities, including those for 5nm, 3nm, and eventually 2nm chips by 2028. The US expansion aims to fill the void left by Huawei's absence and mitigate over-reliance on any single market.
This pivot to the US is multifaceted. It reflects TSMC's strategy to secure orders from American semiconductor powerhouses, who represent a substantial chunk of its clientele, over 60% being US-based. Fierce competition from the likes of Intel and Samsung, who are scaling operations in the US, demands that TSMC keep pace. Furthermore, to counter criticisms that TSMC's US presence lacks substantive contribution, the company plans to complete its advanced chip infrastructure there by adding packaging and testing facilities.
The establishment of these US facilities is not merely for market access; it involves a broader risk diversification strategy. By casting its net wider geographically, TSMC reduces operational risks tied to geopolitical tensions and localizes solutions for varying regional demands, including mature processes aimed at serving the automotive sectors in Japan and Germany.
Meanwhile, in Nanjing, TSMC's expansion caters exclusively to more established technologies, focusing on 28nm and 14nm chips. Even as TSMC enhances its Chinese facilities, the absence of an export license to supply Huawei remains a barrier, limiting engagements with what was once a vital customer. This reflects increasing self-reliance within China, where local champions like Huawei drive semiconductor innovation and production.
Amid this complex landscape, TSMC's strategic US presence signals its adaptive response to the dynamic global semiconductor environment, balancing between securing critical markets and preparing for an unpredictable future. These moves not only aim to sustain its business model but also position TSMC to meet the diverse demands of a fragmented global market.
