Customers look to fill potential void left by Huawei: TSMC

TSMC Chairman Mark Liu (劉德音, right) / CNA photo June 9, 2020

TAIPEI (CNA) — Taiwan Semiconductor Manufacturing Co. (TSMC) said Tuesday that several customers have expressed interest in filling the void that would be left by Chinese telecom equipment giant Huawei Technologies Inc. if the United States further tightens sanctions on the Chinese firm.

At an annual general meeting held Tuesday, TSMC Chairman Mark Liu (劉德音) said several customers have indicated a willingness to purchase more of the chipmaker’s production capacity, which could fill the gap left by Huawei, amid the on-going trade war between Washington and Beijing.

Liu made the comments as shareholders expressed concern about the impact of losing Huawei as a customer following Washington’s sanctions. HiSilicon, a wholly owned IC design unit of Huawei, accounted for 14 percent of TSMC’s total sales in 2019, according to IC Insights.

“TSMC is building itself into a contract chipmaker to serve clients worldwide,” Liu said. “TSMC faces challenges arising from the on-going trade war but, the company is boosting its value and is looking for solutions to overcome hurdles.”

In mid-May, the U.S. Department of Commerce (DOC) announced it was planning to tighten export rules to restrict companies like TSMC selling chips to Huawei.

According to the DOC, the Bureau of Industry and Security (BIS) is revising its foreign-produced direct product rule and the Entity List, which will “narrowly and strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”

The DOC announcement came just hours before TSMC announced a plan to invest US$12 billion to build an advanced wafer foundry in Arizona. However, Keith Krach, the U.S. undersecretary for economic growth, energy and the environment, said TSMC was not given any assurances it would obtain a license to sell its chips to Huawei.

Even if TSMC loses orders from Huawei, it is expected to receive more orders from existing clients and even smartphone makers to make up the losses from the Chinese telecom equipment supplier.

However, Liu said TSMC hopes to keep Huawei as a customer.

In response, market analysts said U.S.-based chipmaker Advanced Micro Devices (AMD) could be one of the companies interested in TSMC’s advanced production technologies to help the American company roll out competitive products and gain a larger market share.

Commenting on the impact of the COVID-19 pandemic, Liu said TSMC has benefited from solid demand for 5G applications and high performance computing devices, offsetting the negative effects of the disease.

As a result, Liu said TSMC has left unchanged its guidance that revenue for 2020 will grow 14-19 percent from a year earlier, while maintaining its capital expenditure plan at US$15-US$16 billion for the year.

At the same meeting, Liu said TSMC is considering the possibility of inviting downstream suppliers to establish plants close to the 5 nanometer plant the company plans to build in Arizona.

Such a move, Liu said, is expected to help those suppliers gain easier access to clients in the U.S. market.

After Liu’s latest clarification about possible changes to TSMC’s business outlook in the wake of restrictions on sales to Huawei, analysts said foreign institutional investors continued to record net purchases of TSMC shares Tuesday.

Over the past seven trading sessions, foreign institutional investors bought a net 83.799 million TSMC shares to lift the stock by NT$27 (US$0.9), boosting the chipmaker’s market capitalization by NT$700.1 billion to NT$8.27 trillion on Tuesday, when its share price closed at the day’s high of NT$319.00, up 0.31 percent.