US Export Regulations Prompt Shift of Manufacturing Away from China
Teradyne, a provider of semiconductor testing equipment, moved manufacturing operations valued at around $1 billion out of China last year, as stated by a Teradyne representative on January 29. This decision was prompted by disruptions in the supply chain resulting from US export regulations. The primary manufacturing facility for semiconductor test equipment, previously located in Suzhou and subcontracted to Flextronics, was affected by the relocation.
Following the issuance of US rules in October 2022, Teradyne, headquartered in Massachusetts, shifted its production away from China. These regulations, implemented to restrict exports to semiconductor manufacturing facilities in China and prevent the use of US technology by the Chinese military, prompted the relocation. In response to the escalating US-China tech conflict and regulatory constraints on sensitive technologies like chip manufacturing, numerous US companies have been working to decrease their dependence on China in recent years.
Teradyne had forewarned investors in its 2022 annual report about the potential repercussions of the October regulations. By October 2023, the company revealed that these restrictions impacted its sales to specific Chinese companies, as well as its manufacturing and development operations. On January 26, during a virtual export conference, Brian Amero, Teradyne's Director of Global Compliance and Ethics, discussed the decision to move manufacturing out of China. Amero explained that the company, which reports earnings on Tuesday, had to secure an emergency authorization to continue manufacturing in China. However, due to perceived risks, Teradyne ultimately deemed it too hazardous and opted to relocate manufacturing out of China, incurring significant expenses in the process.