"Nihon Keizai Shimbun" revealed that before the January 11 Taiwan leader election, US government officials had communicated with TSMC several times. At the end of 2019, Ian Steff, deputy assistant secretary of the US Department of Commerce, held a closed-door talk with TSMC founder Zhang Zhongmou and chairman Liu Deyin during his "visit to Taiwan".

A source in Taiwan said that the United States now requires TSMC to set up factories in the United States to produce military chips in the United States. "This is based on national security considerations. They (Americans) do not intend to compromise." Another source said The U.S. government hopes that TSMC will make a decision before the U.S. election, and points out that this request from the U.S. side is "urgent."

At present, commissioned by Xilinx, the world's largest programmable chip (FPGA) manufacturer, TSMC is currently producing military chips for the US F-35 fighter. However, the production process is concentrated in Taiwan, and the final product is exported to the United States. In contrast, TSMC, currently the only subsidiary in the United States, is responsible for eight-inch wafer production and does not involve military chips.



F-35 fighter

In this regard, the US Department of Defense also seems to have opinions. The Pentagon called TSMC customers many times last year, claiming that in consideration of the situation in the Taiwan Strait and cross-strait relations, it is recommended not to place chip foundry in Taiwan, implying "don't put eggs in a basket."

Regarding the US "emergency call", TSMC responded: "It does not rule out the establishment of a new plant in the United States, but currently has no specific plan."

TSMC currently has an absolute advantage in the global chip foundry market-its market share has reached about 50%. In addition, mainland Chinese companies including Huawei account for about 20% of TSMC's revenue; the North American market contributes about 60% of TSMC's revenue. Today, TSMC also announced the fourth quarter of 2019 financial results. In the quarter, TSMC's revenue was US $ 10.39 billion, an increase of 10.6% year-on-year. The gross margin of TSMC was 50.2% and the net profit was 36.6%.



It is worth mentioning that SMIC has recently been squeezed away from TSMC and won a 14nm order from Huawei Hisilicon. The 14nm process is not TSMC's main cash cow. The company's financial report shows that the 7nm process accounted for 35% of total revenue in the fourth quarter of 2019.

However, from a market perspective, the news that TSMC "goes to produce military chips in the United States" was hedged by negative news that "the US side has further suppressed Huawei." On January 15th, Reuters disclosed that the United States will expand the effectiveness of the "entity list" control and reduce the minimum standard of "US technical content" contained in third-party companies from 25% to 10%. Under the new rules, it is expected that more companies with a business relationship with Huawei will be affected by the "entity list" control. And TSMC has not violated the "25% red line" before, and continues to supply for Huawei.

Affected by this, TSMC US stocks plunged 3.2% on the 15th.