U.S. Revokes TSMC Nanjing Factory Export Exemption

On the evening of September 2, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) announced it will revoke TSMC's "Verified End-User" (VEU) status for its Nanjing factory, effective December 31, 2025. This change means any export of U.S.-controlled semiconductor equipment or related technologies to the plant will now require individual approvals, rather than benefiting from a blanket authorization.

U.S. officials had previously informed TSMC that the Nanjing plant's VEU privileges would end, echoing earlier actions involving Samsung and SK Hynix's facilities in China. TSMC stated it is reviewing the situation and will engage with the U.S. government to ensure continued operations at the Nanjing site.

The move underscores that shipments of controlled semiconductor tools and materials to TSMC's Nanjing factory must now be pre-approved, rather than automatically covered under the plant's previous export exemptions. Taiwan's economic authorities noted that while the revocation affects operational predictability, the Nanjing plant accounts for only about 3% of TSMC's total capacity, leaving Taiwan's overall chip industry competitiveness largely intact.

TSMC's manufacturing footprint in mainland China is relatively limited, including the Songjiang and Nanjing facilities. Songjiang, an 8-inch plant producing mature nodes like 0.13 µm for high-voltage, embedded memory, and MCU products, will not be affected by the expiration of export exemptions.

The Nanjing factory, operational since 2018, contributed only a small fraction of TSMC's revenue in 2024. Initially focused on 16 nm–12 nm nodes, TSMC later expanded 28 nm capacity with a board-approved investment of nearly NT$80 billion, balancing 16 nm/12 nm monthly output at 20,000 wafers and 28 nm/22 nm at 40,000 wafers, including automotive and specialty chips.

Key equipment partners—such as Applied Materials, ASML, Tokyo Electron, and KLA—already face U.S. export restrictions to mainland China, and the VEU revocation adds another layer of regulatory complexity for their engagement with TSMC in Nanjing. Once the VEU status ends, shipments of U.S.-controlled manufacturing tools, spare parts, and process chemicals to TSMC's China plants will require explicit U.S. approvals.

The announcement caused TSMC's U.S.-listed ADRs to dip 2.3% on Tuesday. While U.S. officials indicated a willingness to issue necessary permits to maintain plant operations, the policy shift introduces uncertainty around approval timelines. Authorities are reportedly seeking ways to reduce bureaucratic delays, especially amid existing permit backlogs.

This development is part of a broader U.S. strategy to restrict access to advanced semiconductor technologies in China, aimed at limiting AI and high-tech capabilities. Export controls now affect any advanced chip production facilities in China, including those operated by Samsung and TSMC, though TSMC's local operations remain smaller in scale.

Last week, BIS formally revoked the VEU status for Samsung, SK Hynix, and Intel's Dalian plant (now owned by SK Hynix), citing the closure of "export control loopholes" that had placed U.S. companies at a competitive disadvantage. The move is expected to generate roughly 1,000 additional permit applications for U.S. authorities each year.