TSMC Eyes Japan Expansion as US-China Chip Tensions Continue

Taiwan Semiconductor Manufacturing Co. is reportedly looking to expand its market to its Japanese neighbor. As the United States continues to impose a chip supply curtailment against China, many semiconductor manufacturers, including TSMC, have indicated a willingness to shift production away from China-influenced areas.

Avoiding Geopolitical Risks

This information was first made public by a recent Wall Street Journal report stating that the move is TSMC's attempt to reduce geopolitical risk. Furthermore, the Japanese government has indicated that it would like TSMC to expand in the country beyond a factory that is already under construction, according to the report.

In addition, the budget includes billions in subsidies for domestic advanced chip production. According to the Japanese trade department, it will contribute up to $3.2 billion, or up to half of the total cost of building the TSMC factory.

According to the same source, Apple's chip supplier is constructing its first foundry in Japan, which the Japanese government is subsidizing. The Taiwanese company is said to be researching the viability of the proposed expansion.

In early September, the US government proposed and is currently implementing a new regulation that would restrict the sale of computer chips required for supercomputers and artificial intelligence to Russia and China.

Recently, the demand for semiconductors has decreased due to slower sales of smartphones and personal computers. In response to the slowing demand and rising costs, TSMC reduced its investment plans for this year.

Rising Tensions

Reuters report that new laws prohibit US chip companies from exporting chipmaking equipment to Chinese factories that manufacture advanced semiconductors using sub-14 nanometer processes unless the merchants obtain licenses from the US Commerce Department.

In the meantime, world leaders have expressed concern over Taiwan's ongoing independence from China. According to a CNBC report, US House Speaker Nancy Pelosi's recent visit to Taiwan seemed to escalate tensions between the two big economies, and as a result, China's government began conducting military drills and stopped some imports from Taiwan.

US-China Chip Tensions and Global Supply Chains

China responded earlier this month to Washington's ongoing efforts to levy semiconductor supply to China, warning that such infractions could harm supply chains and the global economy. Chinese officials have criticized the United States' increased restrictions on its access to semiconductor technology.

These statements may be taking shape, as TSMC is said to have reduced its capital spending target for 2022 by approximately 10%. As a result of TSMC's response to slowing global chip demand, the semiconductor industry may be in for a rough patch.

On the contrary, despite these pressing concerns, Bloomberg reports that TSMC is continuing its westward expansion efforts. According to executives, they obtained a license from the US to continue operating and expanding their 16 and 28-nanometer lines in Nanjing, China. They joined companies such as SK Hynix Inc. and Samsung Electronics Co. in obtaining limited exemptions from Washington's new chip restrictions.