[News] Chinese Firms Stockpile Chips Amid Geopolitics; TSMC Sees Rush Orders

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As geopolitical tensions rise, a significant increase in orders from China for TSMC was seen last quarter. According to a report from Economic Daily News, as the U.S. presidential election countdown continues, both party candidates agree on expanding semiconductor export controls to China. Consequently, Chinese companies are stockpiling chips, causing a surge in rush orders for TSMC.

Regarding concerns that Chinese customers seem to be increasing their orders in response to potential future export controls or tax issues, TSMC did not elaborate much during its previous earnings call. They only mentioned that the increase in orders from Chinese customers was mainly due to high-performance computing (HPC) applications.

Concerning U.S. export control issues, TSMC’s management reiterated throughout 2023 earnings calls that the company will comply with all rules and regulations while serving all customers.

Recently, the proportion of TSMC’s orders from China has risen rapidly. The company’s latest financial report shows that in Q2, North America remained the largest market by customer headquarters location, accounting for 65%. The Chinese market, however, surged to 16%, up from 9% in the first quarter and 12% in the same period last year, replacing the Asia-Pacific region as the second-largest regional market. The Asia-Pacific region’s share fell to 9%, Japan remained at 6%, and the remaining share came from the EMEA region.

The sources cited by the report further indicate that as semiconductor export controls to China tighten, many Chinese companies not yet blacklisted under these controls are proactively placing orders and stockpiling goods, especially for advanced processes below 5 nanometers, which are highly valuable.

The sources noted that the current market atmosphere is quite similar to when Huawei’s HiSilicon excessively stocked up before export controls were imposed. This reflects the active development of Chinese companies in the AI field, not only renting computing power from major U.S. companies but also stockpiling chips and equipment on a large scale.

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