As the US strengthens restrictions on China, TSMC and Samsung get exception

14 October 2022
New restrictions in China include high performance computing such as CPUs and GPUs which may have significant impact long term on server farms and cloud computing companies in the country. Source: TSMC

The U.S. Department of Commerce (USDOC) has expanded its restrictions on China, this time limiting high performance computing (HPC) such as CPUs and GPUs.

The restriction not only includes domestic companies in mainland China but also U.S.-based suppliers including server companies that rely on HPCs. Additionally, restrictions may be imposed on semiconductors used in aerospace, automotive and military industries.

The move continues the modern-day arms race for semiconductors as the U.S. continues to restrict exports of technology to China to quell the country’s advancement in the chip space. Previously, the USDOC placed restrictions on wide band gap chips, electronic computer-aided design (ECAD) software and pressure gain combustion (PGC) technology in September.

Prior to that, the U.S. government placed restrictions on semiconductor equipment that can be used to fabricate chips at the 10 nm or better manufacturing processes. This comes after the government placed Huawei and Semiconductor Manufacturing International Corp. (SMIC), China’s largest foundries, on the export restriction list making it nearly impossible for U.S.-based companies to do business with these Chinese vendors.

Servers impacted

According to market research firm TrendForce, this new round of restrictions will have a negligible impact on server terminal shipments in the short term but long term it could be affected depending on the rules set by the USDOC regarding companies that involve military use. It could impact Chinese giants Baidu, ByteDance, Alibaba and Tencent.

Huawei and Sugon, both of which have received restrictions from the U.S. on exports, exited the x86 server market due to the inability to get the right components. Instead, they turned to cloud business providers for server delivery, which now may also be under scrutiny, TrendForce said.

Exceptions for some

According to the Wall Street Journal, Samsung Electronics was granted a one-year exemption from the USDOC to continue receiving semiconductor equipment and other items needed to maintain its memory chip production in China.

Samsung is one of the leading memory semiconductor firms in the world and currently operates chip facilities in two Chinese cities.

Foundry leader Taiwan Semiconductor Manufacturing Co. (TSMC) also secured a one-year license to continue to order U.S.-based chipmaking equipment that will cover TSMC’s Nanjing manufacturing fab in China.

At the same time, TSMC said it would cut 2022 capital expenditures to $36 billion, down from the $40 billion the pure-play foundry would previously spend during the year. The company cited weakening demand in smartphones and PCs as the reason for the cut in capex spending.

According to Nikkei Asia, TSMC is expanding its mature chip production like the 22/28-nanometer process node at the Nanjing fab, which may be part of the reason for the one-year license grant.

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