Taiwan thumbs its nose at Beijing by blocking chip exports to SMIC and Huawei
A symbolic political move
Taiwan has added China's leading foundry operator Semiconductor Manufacturing International Co. (SMIC) and IT giant Huawei to its export control list. The move effectively blacklists the duo from doing business with the chip manufacturing mecca.
At first blush, the changes [PDF] appear mostly symbolic. For the past five years, US export controls have blocked many Taiwanese companies, including fab giant TSMC, from doing business with Huawei or SMIC anyway. It's debatable if these sanctions are even effective at preventing Chinese companies from getting their hands on leading-edge tech. Huawei, for instance, has previously been accused of using shell companies to obtain access to TSMC fabs.
"There's really no material difference here between these sanctions and the US sanctions," G. Dan Hutcheson, Vice Chair at analyst outfit TechInsights, told El Reg.
However, from a geopolitical perspective, Taiwan is making quite a statement, he argues.
For decades the Taiwanese government has operated with autonomy, even as the People's Republic of China has claimed the island under the One China policy.
Up to this point, US sanctions tied the hands of Taiwanese vendors - if they did business with Chinese interests, they would have risked massive fines from the US and might have ended up on the US Entities List, preventing them from doing business with US companies. By endorsing these policies, Taiwan has abandoned the pretense of being stuck between the great powers, and instead has further aligned itself with the US.
"They've crossed a line in the sand," Hutcheson said, adding that we shouldn't expect Beijing to let this go. "There will be some retribution by the Chinese government, but I really don't know how far they're going."
In the past, China's reaction to chip sanctions from the US has been fairly tame, with actions like restricting the sale of rare-earth minerals essential to the production of semiconductors and other high-tech commodities.
However, the threat of Chinese military action against the island has loomed over the region for years.
Essentially every major US chip designer, including Apple, Nvidia, AMD, and Qualcomm, are entirely reliant on TSMC for chip manufacturing today. While Intel continues to operate its own fabs, most of its current product portfolio is actually manufactured in Taiwan.
The economic impact of losing TSMC to the Chinese has been estimated at up to $1 trillion annually in the first few years, leading some US officials to suggest destroying Taiwanese fabs in the event of an invasion.
TSMC, for its part, has taken steps to limit its exposure to such a conflict. In 2020, the world's largest manufacturer of semiconductors announced its intention to build a leading-edge chip fab in Arizona, and it entered production earlier this year.
In the years since breaking ground on its first US fab, the foundry giant has cozied up to American interests, announcing a second fab and advanced packaging facilities, which brought its US investment to roughly $65 billion.
Then in March, just months after President Donald Trump took office, TSMC CEO C.C. Wei promised to invest $100 billion to expand its operations to three additional fabs in Arizona. ®