New Delhi

Teradyne, a prominent supplier of semiconductor testing equipment, has relocated manufacturing operations worth approximately $1 billion out of China, citing disruptions caused by US export controls.

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According to Reuters, the Massachusetts-based company made this strategic move in response to US regulations issued in October 2022, which restricted exports to semiconductor manufacturing facilities in China, aiming to safeguard US technology from contributing to the country's military capabilities.

The main manufacturing site affected by Teradyne's decision was a factory in Suzhou, where the company subcontracted semiconductor test equipment production to Flextronics.

The relocation of manufacturing activities followed the US rules implemented in October 2022, reflecting a broader trend among US companies seeking to reduce dependence on China amid heightened tensions and regulatory constraints in the US-China tech battle.

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Teradyne's annual report for 2022 had already cautioned investors about potential repercussions from the October regulations, emphasizing the impact on sales and operations in China.

Brian Amero, Teradyne's Director of Global Compliance and Ethics, revealed details of the move during a virtual export conference.

Amero explained, "We did manufacturing in China, so we had to get an emergency authorization to continue that activity. We decided that was too risky, so we moved manufacturing out of China — at no insignificant expense."

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 The company faced supply chain disruptions as some suppliers hesitated to ship to Teradyne, despite authorisation.

However, Amero noted that Teradyne eventually obtained licenses to mitigate the impact of the regulations.

He emphasised that the US updated the rules in October 2023, carving out an exception for testing equipment used after a wafer is created.

Amero acknowledged the ongoing challenges posed by the evolving export controls, stating, "It's still a front-burner issue."

While Teradyne was not a "direct target" of the regulations, the company experienced significant impacts, particularly in market share.

Although Amero did not provide specific figures, Teradyne's financials for the three months ending October 1, 2023, revealed a shift, with China accounting for 12 per cent of revenues, down from 16 per cent during the same quarter the previous year.

(With inputs from Reuters)