Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip maker, warned for the first time that trade tensions could disrupt its access to key production equipment and hit its operations, amid growing friction between companies. United States and China.
The Bloomberg report noted that “the company, which produces semiconductors for Apple Inc. and other major global technology companies, said in its annual report released Friday that” ongoing trade tensions or protectionist measures could lead to an increase in prices or even unavailability of key equipment. “It highlighted factors such as delays or denials of export licenses, additional export controls and other tariff or non-tariff barriers.” Below is the full statement from TSMC Form 20-F US SEC on this point:
We may not be able to obtain, in a timely manner and at a reasonable cost, the equipment we need to remain competitive.
“Our ongoing business and expansion plans are dependent on our ability to obtain an appropriate amount of equipment and related services from a limited number of suppliers in a market which from time to time is characterized by limited supply.” and long delivery cycles. During these periods, supplier specific or industry-wide delivery times can be up to six months or more. To better manage our supply chain, we have implemented various business models and risk management contingencies with suppliers to shorten lead times. In addition, increasing complexities especially in advanced lithographic technologies can delay the timely availability of equipment and parts needed to exploit pressing business opportunities and also increase the market price for such equipment and parts. In addition, Ongoing trade tensions or protectionist measures could cause prices to increase or even the unavailability of key equipment, including due to the delay or denial of necessary export licenses, additional export controls and other measures. tariff or non-tariff barriers. If we are unable to obtain equipment on a timely basis to meet our customers’ demand for technology and production capacity, or at a reasonable cost, our financial condition and results of operations could be affected. negatively affected. “
Another segment of TSMC’s Form 20-F reads as follows:
“Any major change in economic, tax and / or business policies in the United States from which we derive a substantial portion of our revenues or in any other major jurisdiction could seriously affect our business, financial condition and results of operations.
For example, recent political and trade tensions between major economies have resulted in and could worsen trade barriers, including higher tariffs on certain products and other protectionist measures that could reduce aggregate consumer demand, increase our costs of manufacture and make our prices less competitive. If and to the extent that certain countries adopt additional protectionist measures such as import and export controls, our ability to offer our products and services in certain markets or to source key materials and safety equipment. Key production may be limited, which may have direct and indirect adverse effects on our sales. Any law or government policy that encourages our customers to relocate their manufacturing capacity or supply chain to their own country or requires their respective subcontractors, subcontractors and relevant agents to do so could also adversely affect our ability to maintain our current level of productivity and manufacturing efficiency.
An important aspect of our business operations is an ecosystem of factories, employees and semiconductor suppliers interconnected in the ROC that provides us with important operational synergies, flexibility and efficiency. For example, we are able to temporarily reassign thousands of our engineers and other affected personnel from one manufacturing site to another who are in close proximity to each other, to refine specific designs and tailor manufacturing processes. in right time. These advantages allow us to efficiently operate our manufacturing plants and quickly resolve any technical or commercial difficulty to maintain our competitive advantage. If these benefits are compromised or lost due to government policy or otherwise, we may not be able to maintain our current ability to provide our customers with goods and services at current levels of cost, quality, quantity and delivery schedule to which our customers have been accustomed. You can read the full Form 20-F here.
The Bloomberg report adds that “TSMC relies on equipment from US suppliers, including Applied Materials Inc. and Lam Research Corp., for production. The company said trade tensions could also prevent it from securing the raw materials needed for production, repeating a point made in the previous one. Annual Report.
The South China Morning Post reported this week that TSMC has suspended new orders from Tianjin Phytium Information Technology Co., one of the US’s blacklisted companies, over concerns about the construction of supercomputers used by them. Chinese military actors, its military modernization efforts or its weapons. of mass destruction.
The Taiwanese chipmaker has warned that new measures taken by China to counter U.S. sanctions could affect its operations. In January, China passed a blocking law that “allowed Chinese entities facing damages for a multinational corporation’s compliance with foreign laws to seek civil remedies,” he said.
“Measures adopted by an affected country to counter the impacts of actions or regulations of another country could result in significant legal liability to multinational companies, including ours,” TSMC said in the report. To learn more, read the full Bloomberg report on MSN Money.
Keep in mind that documents filed with the SEC, such as the SEC Form 20-F, always present the worst-case scenarios for warning investors. Apple’s own SEC filings are filled with negativity about the lawsuits and what could possibly go wrong. So while this information is important to take into account, it is rare that every negative issue arises. You need to balance that with TSMC’s enthusiasm for the future of the business.
Looking to the future, TSMC Chairman Wei Zhejia stressed yesterday that the global economic uncertainty may continue to exist, and TSMC will continue to strengthen the company’s fundamentals to further expand technological differentiation, and they are excited about the company’s prospects. You can read more about this second report here (translation required).
Hopefully the trade war policy will be resolved over time or the negative warnings will eventually emerge and have a ripple effect on global economies. We will care about that another day.