US Directs TSMC to Halt Advanced Chip Shipments to China

Key Insights:

• TSMC halts shipments of 7nm chips to China following new US export restrictions.
• US enforces tighter controls to limit China’s access to advanced AI chip technologies.
• TSMC pledges compliance with all international export regulations amid growing US-China tech tensions.

The United States has directed Taiwan Semiconductor Manufacturing Co. (TSMC) to halt shipments of advanced chips to Chinese customers, effective this week. The U.S. Department of Commerce issued the order to restrict chips of 7-nanometer or more advanced designs, which are commonly used in artificial intelligence (AI) accelerators and graphics processing units (GPUs).

The move follows an investigation revealing that a TSMC chip was found in a Huawei AI processor. Huawei is on the U.S. restricted trade list, requiring special licenses for any technology or goods shipped to the company. Licenses that could support Huawei’s AI development are unlikely to be approved.

Stricter Export Control Measures

The U.S. order was communicated through an “is informed” letter. This regulatory tool allows the Department of Commerce to impose immediate licensing requirements without the need for a formal rulemaking process. This approach has previously been used to restrict chip exports from companies such as Nvidia and AMD.

TSMC has informed affected Chinese clients, including chip designer Sophgo, that shipments of restricted chips are being suspended. The U.S. government also intends to review whether other companies have been diverting advanced chips to Huawei for its AI processors.

TSMC to Adhere to Export Control Rules

Taiwan’s Ministry of Economic Affairs acknowledged the U.S. directive and confirmed that TSMC would comply with international trade laws. The ministry noted that TSMC regularly discusses export control matters with the U.S. government and will ensure its operations align with the latest regulatory changes.

A TSMC spokesperson stated that the company is committed to complying with all export regulations. TSMC reiterated that it will continue to operate within the framework of international trade rules, including those governing export controls.

US-China Tech Tensions and Semiconductor Restrictions

The decision comes as the U.S. tightens its grip on China’s access to advanced technologies. In 2022, the Commerce Department imposed similar restrictions on chip equipment makers such as Lam Research and Applied Materials, preventing them from selling tools used in advanced chip production to Chinese firms.

The Biden administration is also drafting new rules to enhance export controls. These updates aim to add more Chinese companies to the Commerce Department’s restricted entity list. Although initially expected in August, the new rules have yet to be finalized.

The U.S. government has expressed concerns over the potential use of advanced chips to enhance China’s AI and military capabilities. Lawmakers from both political parties have called for stricter enforcement of export controls, arguing that existing measures need to be strengthened.

TSMC Suspends Shipments to Chinese Clients

Following the Commerce Department’s directive, TSMC has informed Chinese clients that shipments of restricted chips will cease. Ijiwei, a Chinese media outlet specializing in semiconductors, reported that TSMC will stop supplying 7-nanometer or more advanced chips to Chinese AI and GPU customers starting November 11.

The suspension affects multiple clients and chip models. Sources indicate that TSMC’s decision to suspend shipments aligns with its commitment to comply with U.S. export restrictions. This development is expected to disrupt the supply of advanced chips to several Chinese technology firms.

The U.S. directive is part of a broader effort to limit China’s access to advanced semiconductor technologies. These efforts include expanding the restricted entity list and enforcing stricter export controls on critical chipmaking equipment and designs.

Industry experts suggest that more restrictions may be introduced as the U.S. continues to monitor the flow of advanced technologies to China. The semiconductor industry remains a central focus of the U.S.-China trade tensions, with both nations seeking to dominate AI and other high-tech sectors.

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