Taiwan Semiconductor Manufacturing Co. (TSMC) has stopped taking new order from Huawei and now they have decided to stop shipping chips to Huawei after mid-September. This decision comes after the US Commerce Department’s expansion of rules to require licenses for sales to Huawei of semiconductors that use US technology.
“We are complying fully with the new regulations and did not take any new orders from Huawei since May 15,” TSMC Chairman Mark Liu told an investors conference. Now under this law, Taiwan based TSMC can sell chips to Huawei if Huawei gets a license from US regulators. This is highly unlikely to happen given the current relationship between Huawei and the US.
Huawei is the biggest purchaser of TSMC silicons. Huawei accounted for 14% sales and 23% revenue share of TSMC in 2019. But TSMC thinks that the Huawei ban is unlikely to have an effect on the company’s revenues. According to TSMC other customers will pick up coveted manufacturing capacity.
It widely reported that Huawei is stockpiling silicons and making very large orders to TSMC so that they have enough supply for the rest of the year. But of course, the supply is not infinite and it will eventually run out. And even if Huawei has enough supply for years they will still be in a bad position as silicon technology is getting better over time. So if the political situation don’t get better over time then it wouldn’t be good for Huawei.
Now Huawei may opt for Shanghai-based Semiconductor Manufacturing International Corp. (SMIC). But SMIC has lagged behind TSMC in major cutting-edge chips to power Huawei’s new products. But according to new rules from the US, in theory, SMIC would also be banned from supplying to Huawei.