Background
Teradyne, a leading supplier of semiconductor testing equipment, has relocated approximately $1 billion worth of manufacturing operations from China. This decision was prompted by recent U.S. export regulations that caused disruptions in the global supply chain.
The Shift
Previously, Teradyne’s main manufacturing site in Suzhou, China, was responsible for producing its semiconductor test equipment under a subcontract with Flextronics. However, following the introduction of new U.S. rules in October 2022, which restricted exports to Chinese semiconductor manufacturing facilities, Teradyne made the strategic move to relocate its production elsewhere.
Impact on Teradyne
In its 2022 annual report, Teradyne had already cautioned investors about the potential impact of these regulations. The company confirmed in October 2023 that the restrictions had indeed affected its sales to certain Chinese companies, as well as its manufacturing and development operations in China.
Supply Chain Challenges
To mitigate the disruptions caused by the export regulations, Teradyne sought emergency authorizations to continue its manufacturing activities in China. However, despite obtaining the necessary authorizations, the company encountered difficulties with some suppliers unwilling to ship to them. This created further delays and challenges in their supply chain.
Efforts to Overcome
Over time, Teradyne managed to secure the required licenses to alleviate the impact of the regulations. Additionally, when the U.S. updated the rules in October 2023, an exception was made for testing equipment used after semiconductor wafers were created.
Outlook
Teradyne’s director of global compliance and ethics, Brian Amero, emphasized that the situation remains a significant concern. While Teradyne itself was not directly targeted by the export regulations, the company has still been significantly affected by them. Nevertheless, the company’s revenue figures for the three months ending October 1 saw a decrease in China’s contribution, from 16% the previous year to 12% currently.
This news comes ahead of Teradyne’s upcoming earnings report, scheduled for Tuesday.