China Targets TSMC, Qualcomm with Export Curbs on Huawei Chips

On July 21, the Financial Times reported that China's Ministry of Commerce is considering implementing export controls that would bar Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and QUALCOMM Incorporated (NASDAQ:QCOM) from manufacturing chips based on designs from Huawei, Alibaba, and ByteDance. Such headlines are likely to hit foundry stocks hard.

Details of the Action

According to the report, Beijing is considering new export restrictions aimed at limiting major Chinese companies' access to advanced chip manufacturing capabilities. The measure would prohibit TSMC and Qualcomm from producing chips that use designs from Huawei, Alibaba, and ByteDance—companies that are either under U.S. sanctions or subject to export controls.

Company Stance

No official comments have been issued by the affected companies yet. However, TSMC and Qualcomm could face significant pressure if these controls are implemented, as Huawei and Alibaba are key customers in the chip space.

Precedents and Context

This move comes amid the ongoing tech war between the U.S. and China. Washington previously imposed restrictions on advanced chip exports to China, prompting Beijing to respond with similar measures. If implemented, Chinese companies may need to seek local alternatives or redesign their products.

Potential Financial Impact

The controls could reduce TSMC and Qualcomm's revenue from Chinese clients, who represent a substantial portion of their business. It may also increase R&D costs for Chinese firms that will need to develop domestic manufacturing capabilities.