The U.S. has revoked Taiwan Semiconductor Manufacturing Co.’s authorization to ship key equipment to its main China facility, the chip manufacturer said on Tuesday.
The change removes a fast-track export privilege known as Validated End User (VEU) status, effective December 31, TSMC said, meaning future shipments of American chipmaking tools to TSMC’s Nanjing site will require U.S. export licenses.
TSMC said it was evaluating the situation and communicating with the U.S. government, adding that it remains “committed to ensuring the uninterrupted operations of TSMC Nanjing.”
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The U.S. granted waivers to TSMC and other foreign chipmakers operating in China after issuing sweeping restrictions on chipmaking equipment to China in 2022.
The authorizations for Samsung and SK Hynix’s China plants were revoked on Friday, with an effective date 120 days later.
The revocations come despite a series of decisions by President Donald Trump to loosen export restrictions on technology, with his administration pledging to rescind Biden-era curbs on global access to AI chips in May and approving licenses last month to sell certain advanced semiconductors to China, including for Nvidia’s H20 chips.
The Commerce Department said Friday that the U.S. planned to grant license applications to allow the foreign companies to operate their existing facilities in China, but not to expand capacity or upgrade technology.
It is unclear how quickly licenses may be approved, potentially slowing deliveries. Reuters last month reported on how thousands of export license applications have been held up, creating a backlog, including for chipmaking equipment.
In June, the news broke that the U.S. was considering revoking the authorizations to the South Korean chipmakers as well as TSMC, making it harder for the foreign chipmakers to operate in China.
The Special Waivers at Risk
After the U.S. imposed export curbs to restrict China’s access to high-end chipmaking tools in 2022, it made an exception for certain non-Chinese manufacturers operating in China. Samsung and SK Hynix—the dominant players in memory chip production—and TSMC, the world’s largest contract chipmaker, received temporary authorizations that let them continue importing U.S. equipment without seeking individual licenses for every shipment.
By 2023 and 2024, the companies had received what the Commerce Department refers to as “Validated End User” (VEU) status, allowing them a more stable and streamlined supply of restricted goods. VEU status not only eased export bureaucracy but also enabled predictable manufacturing operations, as long as the companies adhered to certain conditions, including limits on specific equipment and mandatory compliance reporting.
Lessons from Past U.S. Export Control Reversals
The sudden removal of VEU privileges has revived memories of past U.S. export control reversals that left foreign firms struggling to survive. One of the most prominent examples was ZTE in 2016 and 2018, when Washington banned American suppliers from selling critical components to the Chinese telecom equipment maker. The restriction crippled ZTE’s production lines and nearly pushed the company into collapse until Beijing intervened diplomatically, and ZTE paid a $1.3 billion settlement to regain access.
Another case was Fujian Jinhua Integrated Circuit Co., a state-backed Chinese memory chipmaker, which was added to the U.S. Entity List in 2018. The ban on U.S. chipmaking tools cut off the firm’s access to technology it depended on, stalling its production capacity indefinitely and eventually forcing it into bankruptcy.
Even outside China, Russia’s technology sector in 2022 became a vivid illustration of how U.S.-led controls could devastate entire industries. Following Moscow’s invasion of Ukraine, sweeping restrictions on chip exports to Russia caused the country’s electronics, aerospace, and defense manufacturers to face severe bottlenecks, with reports of factories resorting to dismantling appliances to extract chips.
These precedents highlight the risks for non-Chinese firms like TSMC, Samsung, and SK Hynix. While their operations in China are not directly targeted, the removal of VEU status means their access to U.S. equipment is now subject to the same uncertain licensing process that has left thousands of applications in uncertainty.
For TSMC and its peers, the revocation threatens to inject new instability into their carefully balanced China operations. Although President Trump’s administration has signaled a willingness to relax Biden-era curbs in other areas—such as AI chips—the selective tightening on VEU status illustrates how geopolitical calculations can override earlier waivers.
With the U.S. Commerce Department promising to approve licenses only for “sustaining” existing operations, rather than expanding them, chipmakers face the real prospect of stagnation in their China plants. Industry analysts warn that prolonged delays in license approvals could disrupt supply chains and, in a worst-case scenario, mirror the crippling impact seen in previous cases like ZTE and Fujian Jinhua.
Although TSMC insists it will maintain “uninterrupted operations” in Nanjing, history suggests the company’s ability to do so depends heavily on the pace of U.S. license approvals—and on whether political winds in Washington shift again.