As reported by United Daily News, TSMC has imposed restrictions on Chinese chip design companies, preventing them from ordering chips processed with 16nm technology or smaller unless they utilize third-party packaging services approved by the U.S. government. This policy is a response to the U.S. tightening its export controls, which has pushed numerous Chinese firms to relocate their packaging operations to OSATs (Outsourced Semiconductor Assembly and Test companies) that are on the U.S. whitelist, in order to continue receiving supplies.

In 2023, China accounted for approximately 8% of TSMC’s total revenue, with a considerable portion originating from TSMC’s manufacturing facility in China. Nevertheless, the financial impact on TSMC is anticipated to be slight, as the majority of its revenue—over 70%—is derived from more advanced technology nodes, specifically 7nm and smaller. Additionally, the demand for 16nm FinFET chips is not limited to China but also includes significant markets in the U.S. and Europe, particularly in the automotive sector.

Effective from January 31, 2025, TSMC will not ship any products using 16nm or smaller processes that are not packaged by an OSAT approved by the U.S. government, unless they can provide a certification from the packaging company. In response, many Chinese firms are relocating their packaging operations to ensure continued access to TSMC’s manufacturing capabilities.

Under the new U.S. regulations, the export of chips containing more than 30 billion transistors, manufactured using 14nm, 16nm, or smaller processes, to China and other restricted countries is prohibited without a license from the U.S. Department of Commerce. However, entities from the U.S., Taiwan, and allied countries can seek permits to sell to approved buyers. Chips with fewer transistors and those packaged by approved OSATs are not subject to these restrictions. Given that most modern processors utilize FinFET technology, this policy impacts a wide array of chips. However, consumer CPUs and SSD controllers generally fall below the transistor count threshold, potentially allowing Chinese customers to purchase them. TSMC’s measures appear to be even more stringent than those mandated by the U.S. government, according to reports.

It is expected that major corporations such as AMD, Apple, Intel, MediaTek, Silicon Motion, and Phison will secure licenses for chips that exceed the 30 billion transistor count. The new restrictions also affect AMD, Intel, and Nvidia, which now need export licenses to sell mainstream GPUs to China—a change from previous regulations. The primary aim of the U.S. government is to regulate the flow of AI chips to China, Iran, and Russia and to eliminate workarounds that previously allowed blacklisted entities to acquire high-performance AI processors indirectly. TSMC is reportedly adhering to these regulations more rigorously than required.

We have reached out to TSMC for confirmation of these details and will update this article with any new information we receive.