TSMC says not fazed by lowering of 'dual-use' threshold

January 20, 2020 //By Peter Clarke
TSMC says not fazed by lowering of 'dual-use' threshold
Wendell Huang, CFO of foundry chip vendor TSMC, has told analysts that his company would follow the law if a "dual-use" threshold is reduced to 10 percent from 25 percent.

Huang was speaking to analysts at the TSMC's conference to discuss its fourth quarter results.

The phrase 'dual-use' refers to the potential use of technology for military as well as commercial applications. Under the Wassenaar agreement of 1996 the US can block the export a third-party country's export of goods to other countries if US components or technology contribution comprise 25 percent or more of the product.

Measuring that contribution can be very difficult and potentially arbitrary. There has been some speculation that the United States may reduce the threshold to 10 percent (see US lobbied hard to deny China EUV lithography). TSMC is already a major supplier to such companies as HiSilicon and Huawei and the China is responsible for about 20 percent of TSMC's business.

In response to a question from an analyst Huang said TSMC has an extensive export control systems in place and would follow the law if the United States' dual-use threshold is reduced to 10 percent (from 25 percent).

"We are everyone's foundry and we will deal with each customer fairly and equally. Secondly, we have been and we will follow the law and regulation. So, upon the regulation being effective, we will carefully study and evaluate product-by-product our eligibility in the export. And we have – we really have a very sophisticated export control system as you might know," said Huang. He concluded by saying: "So we are prepared to deal with this new export control regulation."

TSMC's leadership position in 7nm and 5nm production protects the company to a certain extent.

If certain Chinese suppliers of 5G smartphones and smartphone silicon are prohibited from access to TSMC's production other smartphone vendors will rise up to fill the gap and those vendors will likely have to come to TSMC. However, a raising of US-China tension will likely have an inhibitory effect on global GDP and could stimulate other developments.

Related links and articles:

www.tsmc.com

News articles:

US lobbied hard to deny China EUV lithography

China warns Netherlands over blocked ASML export

Intel apologies for another supply shortfall


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