U.S. Orders TSMC to Suspend Chip Shipments to China

The US government has instructed Taiwan Semiconductor Manufacturing Co. (TSMC) to cease shipments of advanced semiconductor chips to Chinese customers, effective Monday. These chips, which are essential in powering artificial intelligence (AI) accelerators and graphics processing units (GPUs), are of 7-nanometer designs or more advanced. The Department of Commerce has imposed export restrictions on these specific chips as part of its ongoing efforts to curb China’s progress in AI and semiconductor technology, according to a person familiar with the matter.

The order follows an incident where TSMC informed the US government that one of its chips was found in a Huawei AI processor. The chip, uncovered by tech research firm Tech Insights, was allegedly involved in a violation of US export controls. Huawei, which is already on the US restricted trade list, cannot legally receive technology that could bolster its AI capabilities unless it obtains a license. Since the US is highly likely to deny such licenses, the finding raised concerns over the potential diversion of sensitive technology to the Chinese company.

In a related development, TSMC also suspended shipments to the Chinese chip designer Sophgo, whose chip was found to match the one used in the Huawei AI processor. This follows the discovery of a TSMC chip in Huawei’s Ascend 910B AI chip, released in 2022, considered the most advanced AI chip produced by a Chinese company. The suspension of TSMC’s shipments now extends beyond just these specific cases, targeting a broader range of Chinese firms that may be indirectly supplying chips to Huawei for its AI development.

The US Department of Commerce’s latest move allows it to assess whether other companies are circumventing existing export controls by sending chips to Huawei. TSMC, in response to the new restrictions, informed affected clients that shipments of advanced chips would be halted starting November 11. However, the Commerce Department declined to comment on the matter.

TSMC, known for its commitment to complying with international laws, has reassured stakeholders that it will continue to adhere to both US and international regulations regarding export controls. Taiwan’s economy ministry also reiterated the company’s willingness to comply with legal requirements, referring any specific inquiries to TSMC itself. The company has consistently held discussions with the US government on export control issues.

This action is part of broader US efforts to address concerns raised by both Republican and Democratic lawmakers about the effectiveness of export controls on China. In previous years, the US imposed restrictions on major semiconductor companies, including Nvidia, AMD, and equipment makers like Lam Research and Applied Materials, preventing them from exporting cutting-edge AI chips and tools to China. These restrictions were later codified into rules applying to a wider range of companies.

Despite this, the US has faced delays in updating its export control regulations. Although new rules were initially planned for release in August 2024, the Biden administration has yet to finalize them. The new regulations aim to restrict the export of advanced chipmaking equipment to China and add approximately 120 Chinese entities to the US restricted entity list, including companies involved in semiconductor manufacturing and chipmaking equipment production.