 "With giants like Apple and Nvidia on its client list, TSMC has no choice but to comply fully with US investigations. Image Credit: Reuters")
The escalating tech battle between the US and China is putting immense pressure on Taiwan Semiconductor Manufacturing Co. (TSMC), the chip-making giant behind Apple’s processors.
A key supplier for Apple since 2014, and a manufacturer for some of the most advanced AI chips, TSMC has been striving to remain neutral amidst the geopolitical turmoil. However, maintaining its “Switzerland of semiconductors” stance is proving increasingly difficult as tensions rise.
US Scrutiny and Sanctions on Chinese Tech
TSMC’s neutrality has been tested, particularly as the US tightens its grip on semiconductor exports to China. Since 2020, sanctions have aimed to block Chinese firms like Huawei from accessing advanced chips without approval. Further restrictions in 2022 targeted AI chip exports, adding to the pressure on companies operating in both markets.
Recently, the US Department of Commerce began investigating TSMC for allegedly breaching sanctions, suspecting the company may have unwittingly supplied Huawei with chips through a third-party intermediary. The chip in question resembles Huawei’s Ascend 910B, which is designed for training AI models — a sensitive area in the tech rivalry.
In response, TSMC has launched an internal review of its Chinese customer base, halting suspicious orders and even destroying questionable wafers. Despite these efforts, the company faces scrutiny from both sides, walking a tightrope to avoid offending either its US or Chinese partners.
Balancing Acts and Business Risks in China
TSMC’s challenge isn’t just about staying in the US’s good graces. The company operates two factories in China, catering to a wide array of local clients. Any misstep could invite intervention from Chinese authorities, risking profits and potentially destabilising the global semiconductor supply chain. With such high stakes, TSMC must tread carefully while investigating its Chinese operations.
When questioned by Chinese officials about the US probe, TSMC reportedly emphasised its obligation to follow US regulations but assured China it would not take additional punitive steps beyond what was required. This balancing act reflects the delicate position TSMC finds itself in, trying to maintain its extensive business ties with both superpowers.
TSMC’s tightrope between markets
The reality for TSMC is that its dependence on US clients — who account for 65 per cent of its revenue — leaves little room for them to manoeuvre. With giants like Apple and Nvidia on its client list, the company has no choice but to comply fully with US investigations. It hopes that by cooperating transparently, it can avoid hefty penalties, while demonstrating the difficulty of vetting clients in a complex supply chain.
As the US-China tech rivalry intensifies, TSMC’s balancing act underscores the broader challenges faced by global businesses caught between two competing superpowers. How well it navigates this high-stakes game could have far-reaching implications for the semiconductor industry as a whole.