Huawei ban may impact Taiwan's packaging and testing plants

The U.S. Department of Commerce has launched a heavy-handed attack on Huawei, upgrading its export ban. In addition to TSMC's suspension of orders from Huawei's HiSilicon from May 15, previous orders were expected to be shipped by mid-September. HiSilicon's main back-end packaging and testing factories have determined that the real impact will not be apparent until the fourth quarter of this year. If the U.S. does not loosen up, ASE's subsidiary Siliconware Precision Industries, which has undertaken HiSilicon's back-end packaging and testing, professional IC testing factories King Yuan Electronics and Siliconware Precision Industries, and LCD driver IC packaging factory Chipbond will all be caught up in the storm.

The U.S. Department of Commerce issued new export controls on the 15th of this month, requiring that U.S.-made equipment or technology must be used for production. If Huawei is to be supplied, it must first obtain permission from the U.S. government. Although the United States has granted a 120-day grace period, it is almost impossible for TSMC to circumvent this ban by switching to other non-U.S. equipment.

HiSilicon's decision-makers recently admitted at an analyst conference that the new US ban will inevitably have a huge impact on its business, but also revealed that they will try their best to find a solution. Industry analysts believe that HiSilicon should be able to break through by purchasing from chip companies such as MediaTek, Realtek, and Synaptics.

TSMC has mobilized American lawyers to conduct a comprehensive review of the new US regulations, hoping to find a basis for continued shipments. However, since TSMC must use almost all US automated design tools and equipment in chip design and manufacturing, and the proportion is very high, TSMC has stopped accepting orders from HiSilicon, affecting the back-end packaging and testing supply chain.

HiSilicon originally had a large number of wafers directly invested in TSMC, accounting for more than 10% of TSMC's revenue. In the first half of the year, due to urgent orders from HiSilicon, the proportion increased by nearly 15%. As a result, HiSilicon stopped accepting orders and the 120-day grace period expired. It is estimated that HiSilicon will no longer be able to ship after mid-September.

According to the schedule, the back-end packaging and testing will be postponed for one quarter, and the impact will fall on the fourth quarter. Among them, Siliconware Precision Industries, which undertakes the packaging of mobile phone chips and 5G base stations, and King Yuan Electronics, which undertakes the testing of 5G base station chips, will be the first to be affected as their revenue accounts for more than 20%. Although Siliconware Precision Industries and Chipbond's share is not as large as the former two, they will also be affected.

The supply chains of Siliconware Precision Industries and King Yuan Electronics stated that although relevant Taiwanese chip factories will fill in during this period to reduce the risk of a sharp drop in HiSilicon's chip production, if the US does not relax the ban and HiSilicon and TSMC do not find a solution, the impact will be fully apparent at the beginning of next year. Therefore, we must closely observe the subsequent offense and defense between the US and China.