By Karen Freifeld
(Reuters) - Teradyne (NASDAQ:TER), a supplier of semiconductor testing equipment, pulled manufacturing worth about $1 billion out of China last year, a Teradyne spokesperson said on Monday, after U.S. export regulations led to supply chain disruptions.
A factory in Suzhou was the company's main manufacturing site for its semiconductor test equipment, which it subcontracted to Flextronics.
Massachusetts-based Teradyne moved its production out after U.S. rules issued in October 2022 restricted exports to semiconductor manufacturing facilities there as part of an effort to keep U.S. technology from helping China's military.
Many U.S. companies have been trying to reduce their reliance on China in recent years as the U.S.-China tech battle ramps up and regulators limit trade in sensitive technologies like chip making.
Teradyne, which reports earnings on Tuesday, warned investors in its 2022 annual report about the potential impact of the October regulations, and in October 2023 said the restrictions hit both Teradyne's sales to certain companies in China and its manufacturing and development operations.
On Friday, Teradyne's director of global compliance and ethics, Brian Amero, told a virtual export conference about the move out of China.
"We did manufacturing in China, so we had to get an emergency authorization to continue that activity," Amero said at the Massachusetts Export Center's annual export expo. "We decided that was too risky so we moved manufacturing out of China — at no insignificant expense."
Amero said some suppliers would not ship to the company, despite its authorization, leading to supply chain disruptions. It eventually got licenses to mitigate the impact of the regulations, the company reported, and when the U.S. updated the rules in October 2023, it carved out an exception for testing equipment used after a wafer is created.
"It's still a front-burner issue," Amero said during a conference session titled, "The China Balancing Act: Complying with Export Controls While Maintaining Your Sanity."
While Teradyne had not been a "direct target" of the rules, he said, the company had been "significantly impacted by them. And we're seeing that show up in market share."
Amero did not provide numbers. But for the three months that ended Oct. 1, China accounted for 12% of revenues, versus 16% for that quarter a year earlier.