The U.S. government recently announced the revocation of the “Verified End-User” (VEU) status for foreign semiconductor companies such as TSMC’s Nanjing plant, marking a stricter phase in U.S. export controls on semiconductors to China. Financial experts analyzed that this move will have far-reaching implications, shifting from the previous “green channel” to a tedious “case-by-case approval” process, potentially leading Chinese firms to face supply disruptions and escalating U.S.-China tech warfare, entering a new stage in strategic competition.
The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) released a significant new regulation on September 2, announcing the complete closure of the VEU program. This measure, effective from December 31, 2025, after a 120-day buffer period, directly impacts TSMC’s Nanjing plant, Samsung Electronics, and SK Hynix’s production bases in China.
The VEU program was previously considered a “special pass” for foreign semiconductor manufacturers in China, allowing them to import U.S. advanced equipment and core technologies without licenses.
Under the new regulations, these factories will now need to apply for licenses for the import of any U.S. equipment on a case-by-case basis. The U.S. Department of Commerce emphasized that they will prioritize approving applications that maintain the normal operation of existing production lines but firmly reject projects involving capacity expansion or technology upgrades.
“This is a crucial step in closing export control loopholes,” said Jeffrey Kessler, Deputy Secretary of the U.S. Department of Commerce, in an official statement. “We must correct policy flaws that put U.S. companies at a competitive disadvantage.”
Renowned Taiwanese financial expert Huang Shicong analyzed the deep implications of canceling VEU status. “This shift from the previous ‘green channel’ to a ‘case-by-case approval’ process is like being forced to take the backroads instead of the freeway,” he vividly illustrated.
Huang further explained the technical focus of the control measures, primarily targeting advanced processes of 14 nanometers and below, which are slightly advanced but strategically crucial technology nodes.
Assessing the future trajectory of U.S.-China tech competition, Huang predicts, “Strategic competition between the U.S. and China is entering a new phase – the semiconductor game. The U.S. is seeking to weaponize semiconductor technology, while China may utilize rare earth resources as a countermeasure. The tug-of-war between the two sides is likely to intensify further.”
Discussing the practical challenges of seeking alternative suppliers, Huang candidly admitted, “The core semiconductor components’ suppliers are highly concentrated in the U.S., as U.S. technology forms the core basis for control. Many products seemingly originating from other countries actually contain U.S. technology.”
Sun Guoxiang, a professor of International Affairs and Business at Nanhua University in Taiwan, analyzed from a technical operational perspective. “After the cancellation of the VEU status, all key tools, components, and chemical materials subject to U.S. controls at TSMC’s Nanjing plant must be individually applied for export permits.”
He told Dajiyuan, “This means that the pace of equipment maintenance, technology upgrades, and capacity expansions may significantly slow down, inevitably leading to rising costs in the overall supply chain.”
Sun described the technological positioning of the Nanjing plant, primarily focusing on producing chips in 16, 12 nanometers, and 28, 22 nanometers processes. Although not the cutting-edge advanced processes, it still holds stable demand in areas like automotive chips, communication devices, and consumer electronics SoCs, representing commercially valuable mid-range processes.
He further analyzed the deep-seated impacts of the control measures on operations, highlighting severe limitations on the timing of expanding relevant technology nodes, upgrade pace, and operational predictability.
Facing the sudden escalation of U.S. control measures, TSMC swiftly issued a response, confirming receipt of the official notification and actively evaluating the related impacts. The company pledged to maintain close communication with the U.S. government to ensure the continuity and stability of operations at the Nanjing plant.
TSMC’s Nanjing plant focuses on producing 16-nanometer process chips and is the company’s only manufacturing facility within China’s BIS control scope. In terms of production capacity share, the Nanjing plant only accounts for around 3% of TSMC’s global total capacity, indicating relatively limited impact.
Taiwan’s Economic Affairs Minister Gong Mingxin responded to the media on Wednesday (September 3), stating that the Nanjing plant’s production capacity share is minimal, and TSMC’s direct impact is noticeably lighter. In contrast, Samsung’s production capacity in China represents about 20% of its global total, while SK Hynix accounts for a substantial 40%.
Gong noted that the simultaneous cancellation of VEU status for Samsung and SK Hynix signifies that this action is not a targeted “precision strike” against specific businesses but a systemic measure as part of U.S. efforts to strengthen semiconductor controls comprehensively.
In response to the dual challenges of increased U.S. tariffs and technology controls, the Taiwan government has devised a comprehensive industry support strategy. Minister of Economic Affairs Gong Mingxin revealed that “the special legislation passed by the Legislative Yuan will provide the industry with at least NT$93 billion in special budget support, and there is an additional NT$20 billion in emergency funds available for immediate utilization.”
As of September 1, the latest statistics indicate that various support programs have shown positive effects: with 100 financial assistance applications, 236 research and development upgrade transformation projects, and close to 300 channel marketing and construction projects.
Huang, from a strategic standpoint, analyzed the underlying motives behind the VEU adjustments. “This measure is closely linked to the impending Section 232 investigations. The U.S. investigations against the semiconductor industry under Section 232 may lead to new tariff measures, and this VEU adjustment is likely a preemptive ‘first move.'”
Section 232 is a trade investigation mechanism initiated by the U.S. based on national security considerations, which may result in differentiated tariffs on semiconductor products in the future, with significantly varying rates for different countries and products.
Huang further speculated on the U.S.’ negotiation strategy: “The Trump administration may wish to replicate its approach against Nvidia, imposing a 20% ‘security fee’ on chips sold to China, then using this as a vital bargaining chip in strategic competition with China.”
From a business operations perspective, Sun Guoxiang raised a more stringent long-term warning. “If individual permit applications evolve into a normalized ‘presumed rejection’ operation, where critical maintenance parts are long unavailable in a timely manner, leading to failure to meet production yields and delivery commitments, the opportunity cost of continuing operations will exceed the losses from closure or relocation.”
He believes that when control measures erode company margins to the point where they cannot cover compliance risk premiums, “rational withdrawal becomes an inevitable choice.” Such assessments offer crucial insights for relevant companies in long-term strategic planning.