A reported investigation by the U.S. commerce department into TSMC potentially violating export controls highlights the complexities and political nature of the semiconductor supply chain. TaiwanPlus talks to TECHnalysis chief analyst Bob O'Donnell to learn more.
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00:00The US has reportedly opened an investigation into TSMC for violating export regulations
00:06and know-your-customer regulations by supplying Huawei with AI and smartphone chips.
00:13And this also just comes one day after the government announced additional steps to stemming
00:19the wave of third-party companies supplying Huawei with these kinds of chips.
00:25Can you speak to how big of a problem this is?
00:28Well, you know, the supply chain in the tech industry, Alec, is very, very complicated.
00:34It always has been, and it's just getting more so over time.
00:37As devices get more sophisticated, they include more components in them.
00:41It becomes a huge issue to track all of this down.
00:45So, you know, I think the initial efforts by the US Commerce Department were focused
00:49on trying to prevent companies who purchase chips from TSMC.
00:55And so because the idea is, you know, the US is concerned, of course, that oftentimes
00:59these more advanced chips do end up in military systems as well, and that's what's triggered
01:04a lot of this.
01:05And so that's why we saw that initial pressure.
01:08Now, you know, this takes it even further, as you said, because if TSMC is somehow directly
01:15supplying those chips to some of these smaller companies in the supply chain, obviously that's
01:21another big issue.
01:22But again, it points to how complicated all of this is today and how difficult it is to
01:29keep track of where all these components are going.
01:32So with that in mind, can you speak a little bit to how difficult it is for companies like
01:35TSMC to monitor their supply chains?
01:39Well, I mean, you know, you would, obviously everybody would think that they would know
01:44who their customers are, but it wouldn't be the first time in the world that we've seen,
01:49whether it's in the tech industry or other places, where some company was misrepresenting
01:54who they actually were.
01:56And it could be that that's the case and somehow, you know, TSMC was not aware that this is
02:00who these companies were and where, in fact, those chips were eventually going.
02:05One thing I will say is over the last couple of years, because of all the concerns about
02:10this, actually quite a few of the big computer system manufacturers, companies like Dell
02:16and HP and Lenovo and others like that, and I believe Apple as well, they actually have
02:23systems in place to now track this because they want to ensure that nothing has been
02:29inserted into their devices along the way.
02:33So this also comes just one day after TSMC posted their highest ever quarterly revenue
02:38returns.
02:39Can you speak a little bit about how big of news this would be for TSMC and then the potential
02:45implications and consequences for the wider semiconductor and tech industries at large?
02:52The bottom line is TSMC reports where their chips go in terms of regions, and China is
02:58still much smaller than the US.
03:00So it would be in terms of the impact to TSMC directly, you know, it might be modest.
03:07It's more of a political issue in terms of what they're going to have to do to avoid
03:11these kind of concerns being raised in the future.
03:14Look, the reality is TSMC is sort of in the commanding position right now because all
03:21the most advanced, well, not all, the vast majority of the most advanced chips in the
03:25world are coming from TSMC.
03:28So companies in the US are utterly dependent upon them.
03:31You know, I think it's going to, it's certainly going to raise some red flags, especially
03:35when you've got the US government giving funding and incentives to TSMC to, for example, build
03:42a factory in Arizona.
03:43So it's a very sticky problem if it turns out, you know, there's some things going on
03:48here.
03:49But my guess is, I mean, TSMC has had a pretty good record of trying to keep clean and away
03:55from politically driven issues.
03:58It may simply be a case where some of these companies, again, misrepresented themselves
04:03to TSMC, and now it's being discovered and actions will be taken right away.