Taiwan Semiconductor Manufacturing Co. (TSMC), the world's leading contract chipmaker, has received an extension to its exemption from U.S. trade sanctions, allowing it to continue acquiring advanced American chipmaking equipment for its operations in China. The company is now pursuing permanent U.S. authorization for these acquisitions, crucial for its operations in the world's largest semiconductor market.
TSMC operates facilities in a Shanghai suburb and a Nanjing site where 16-nanometer chips are manufactured. Amid escalating U.S.-China trade tensions and rigorous export controls designed to hinder Beijing's tech growth, TSMC has managed to secure this crucial waiver extension. The company aims to secure a Validated End-User (VEU) status, advised by the Bureau of Industry and Security, under the U.S. Department of Commerce. This verified end-user designation would serve as a permanent authorization, eliminating the need for separate export approval.
In addition to TSMC, South Korean counterparts Samsung Electronics (KS:005930) Co. and SK Hynix Inc., have also been granted indefinite waivers from broader restrictions on transporting advanced American chipmaking equipment to China. These developments are a response to last year's U.S. regulations that cast doubt on foreign chipmakers like TSMC operating in China due to Beijing's tech ambitions.
The Biden administration has recently eased curbs on expansion in China by semiconductor firms that receive U.S. subsidies for building plants in the U.S. Companies like TSMC and Samsung secured one-year waivers last year and are expected to secure such subsidies for their new U.S. facilities.
Even with VEU program waivers, chipmakers encounter investment restrictions in China due to policies like the National Security Guardrails and the CHIPS Act. The latter involves a massive $52.7 billion injection into the American semiconductor industry to enhance manufacturing and R&D, including $39 billion in subsidies for companies to build new facilities and expand operations in the U.S., such as TSMC's two advanced wafer fabs in Arizona.
In the context of the global semiconductor industry, TSMC is a prominent player, as highlighted by InvestingPro Tips. The company operates with a high return on assets and yields a high return on invested capital. Notably, TSMC has been profitable over the last twelve months, and analysts predict the company will remain profitable this year.
InvestingPro's real-time metrics show TSMC's market cap at a whopping 442.72B USD, and its P/E ratio stands at 14.61. The company's revenue growth for the last twelve months was 18.64%, though it has been slowing down recently. The gross profit margin stands at an impressive 58.63%.
Despite the ongoing complexities in the global semiconductor industry, TSMC shares traded higher by 1.11% at $93.45 premarket on Friday. The company, which has a fair value of 103.25 USD according to InvestingPro, is expected to release its earnings results on April 20. For more insights and tips on TSMC and other companies, consider subscribing to InvestingPro, which offers access to over 21 additional tips.
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