Teradyne Shifts $1 Billion in Manufacturing Away from China Amid U.S. Export Controls

Semiconductor testing equipment supplier Teradyne relocated manufacturing valued at approximately $1 billion out of China in response to U.S. export regulations, a company spokesperson confirmed on Monday. The move came as a result of disruptions in the supply chain caused by new U.S. rules implemented in October 2022, restricting exports to semiconductor manufacturing facilities in China to prevent technology assistance to the Chinese military.

Teradyne’s main manufacturing site for semiconductor test equipment was located in Suzhou, subcontracted to Flextronics. The Massachusetts-based company decided to shift its production away from China due to concerns arising from the October regulations.

In its 2022 annual report, Teradyne had warned investors about the potential impact of these regulations. By October 2023, the company disclosed that the restrictions had affected its sales to specific Chinese companies, as well as its manufacturing and development operations.

Brian Amero, Teradyne’s Director of Global Compliance and Ethics, revealed the move out of China during a virtual export conference on Friday. He explained that the company had to secure emergency authorization to continue manufacturing activities in China. However, faced with perceived risks, Teradyne opted to relocate its manufacturing operations at a substantial cost.

Amero noted that some suppliers were hesitant to ship to Teradyne despite authorization, resulting in supply chain disruptions. Although the company eventually obtained licenses to mitigate the impact of the regulations, ongoing concerns persisted. Updates to U.S. rules in October 2023 provided an exception for testing equipment used after creating a wafer.

During a conference session titled “The China Balancing Act: Complying with Export Controls While Maintaining Your Sanity,” Amero acknowledged that Teradyne had not been a direct target of the rules but had been significantly impacted, affecting its market share. While specific figures were not provided, Teradyne’s revenues from China for the three months ending October 1 accounted for 12%, down from 16% in the corresponding quarter the previous year. Teradyne is set to report earnings on Tuesday.

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