TSMC to reduce about $7 billion in capital expenditure due to Huawei’s ban


The U.S. government and Huawei have been at loggerheads over multiple issues. This tussle has been on for over a year now and Huawei is currently suffering from multiple bans. Huawei can not do business with American company without a license from the government. This means that its smartphones can not use Google Mobile Services. This is severely affecting its smartphone business outside China. Not satisfied with Huawei’s suffering, the American government extended the ban to non-American companies that use American technology. The target for this new law is TSMC, the maker of Huawei’s Kirin chip.


Gizchina News of the week

Huawei is the second-largest customer of TSMC. In 2019, Huawei alone contributed 14% of TSMC’s overall revenue. In fact, Huawei was gearing up to surpass Apple as TSMC’s largest customer before the ban. While the ban obviously hurts Huawei, TSMC is hurt too. According to analysts, TSMC is expected to reduce $7 billion in capital expenditure from 2020 to 2021. This is a direct implication of Huawei’s ban on the chipmaker.

TSMC will have to cut production capacity

According to CLSA Asia director, Xiaoxi Yang, TSMC customers have begun to cut orders. He also expects the company to reduce its 5nm processes production capacity. TSMC’s initial target for 5nm chips is 1.5 million wafers month. It will also reduce the 7 nm production capacity reduction. According to reports, the total reduction will cost the company $ 5-7 billion in capital expenditures between 2020 and 2021.

Not only did customer orders decrease, TSMC is also delaying orders with equipment suppliers. In fact, there are speculations that some new equipment orders will arrive in December 2020, instead of June 2020.

Read Also:  TSMC plant in Arizona will make 3nm chips, it's a $12Bn investment

In 2021, TSMC may also negotiate with ASML to actively reduce the payment of EUV lithography machines. This will in turn cause a chain reaction on the upstream and downstream of the global semiconductor. However, for the reduction of capital expenditure, TSMC officials claim that there is no change. Nevertheless, analysts believe that the downward adjustment is inevitable.

Source/VIA :
Previous Ren Zhengfei: 5G is important for commercial users, 6G will come in ten years
Next Huawei HiSilicon recruits talented young people globally

1 Comment

  1. Surfer9
    May 31, 2020

    This is what happens when you deal with Americans who made Nokia vanish.. you can eat it now TSMC!