Teradyne, a well-known provider of semiconductor testing equipment, has undertaken a significant move, relocating manufacturing operations valued at around $1 billion out of China. This decision was prompted by disruptions arising from US export controls, as reported by Reuters. The Massachusetts-based company strategically shifted its manufacturing activities in response to US regulations issued in October 2022, which imposed restrictions on exports to semiconductor manufacturing facilities in China. The intent behind these regulations was to safeguard US technology from contributing to China’s military capabilities.
The primary manufacturing site impacted by Teradyne’s decision was a factory in Suzhou, where the company had subcontracted the production of semiconductor test equipment to Flextronics. This move aligns with a broader trend among US companies aiming to reduce dependence on China amidst heightened tensions and regulatory constraints in the ongoing US-China tech battle.
Teradyne had already forewarned investors about potential repercussions from the October 2022 regulations in its annual report for that year, emphasizing the potential impact on sales and operations in China.
Brian Amero, Teradyne’s Director of Global Compliance and Ethics, disclosed details of the relocation during a virtual export conference. Amero explained that Teradyne, being engaged in manufacturing in China, had to secure an emergency authorization to continue those activities. However, given the perceived risk, the company decided to move its manufacturing operations out of China, incurring significant expenses in the process.
Supply chain disruptions were encountered as some suppliers hesitated to ship to Teradyne, despite having authorization. Eventually, Teradyne managed to obtain licenses to mitigate the impact of the regulations. Amero highlighted that the US updated the rules in October 2023, introducing an exception for testing equipment used after a wafer is created. Despite these adjustments, ongoing challenges persist due to the evolving nature of export controls, with Amero noting that it remains a “front-burner issue.”
While Teradyne was not a “direct target” of the regulations, the company experienced notable impacts, particularly in market share. Although specific figures were not provided, Teradyne’s financials for the three months ending October 1, 2023, indicated a shift, with China accounting for 12% of revenues, down from 16% during the same quarter the previous year.
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