US Orders TSMC to Suspend Shipments of AI-Related Chips to China

The U.S. has instructed Taiwan Semiconductor Manufacturing Co. (TSMC) to halt shipments of advanced chips, often used in artificial intelligence applications, to Chinese customers starting Monday, according to a source familiar with the matter. The Department of Commerce issued a letter imposing export restrictions on certain high-performance chips—those with 7-nanometer or more advanced designs—that are used in AI accelerators and graphics processing units (GPUs) for China.

The new order follows a recent incident where TSMC informed the U.S. government that one of its chips was found in a Huawei AI processor, as reported by Reuters. The discovery, made by tech research firm Tech Insights, revealed that TSMC's chip was part of a Huawei product, potentially violating export control laws. Huawei, already on the U.S. trade blacklist, requires special licenses to receive U.S. technology, and any licenses related to AI technology are unlikely to be granted.

As part of the broader crackdown, TSMC had already suspended shipments to Chinese chip designer Sophgo after one of its chips was linked to Huawei’s AI processor. The U.S. order now targets a wider range of companies, allowing authorities to investigate whether other Chinese entities are rerouting chips to Huawei for its AI operations.

TSMC notified affected clients that shipments of the restricted chips will be suspended starting Monday. The Commerce Department declined to comment on the matter. TSMC, for its part, reaffirmed its commitment to complying with all export controls, with a company spokesperson saying it is a "law-abiding company" in line with all regulations.

The U.S. government has been stepping up scrutiny of tech exports to China amid concerns from lawmakers about the effectiveness of existing export controls. In 2022, similar restrictions were imposed on U.S. chipmakers Nvidia and AMD, as well as equipment manufacturers like Lam Research and Applied Materials, limiting their ability to ship AI-related products and semiconductor manufacturing tools to China.

This latest move follows a series of delayed updates to export control rules, with the Biden administration working on new regulations that could further restrict tech exports to China. These regulations were expected to be finalized earlier this year but have yet to be issued.