The US has ordered TSMC to suspend exports of AI application chips to China

The Ministry of Commerce has sent a letter to TSMC imposing export restrictions on certain advanced chips, with a design of 7 nanometers or more, destined for China and powering AI accelerator and graphics processing units (GPU).

The US order, reported for the first time, comes just weeks after TSMC notified the Commerce Department that one of its chips had been found in a Huawei AI processor, as reported last month. Technical research firm Tech Insights had taken the product apart, revealing the TSMC chip and an apparent violation of export controls.

Huawei, which is at the center of the U.S. action, is on a restricted trade list, which requires suppliers to obtain licenses to ship goods or technology to the company. Any license that could support Huawei’s AI efforts would likely be denied.

TSMC has suspended shipments to China-based chip designer Sophgo after its chip matched that of Huawei’s AI processor, sources said last month.

The report could not determine how the chip ended up on Huawei’s Ascend 910B, released in 2022, seen as the most advanced AI chip available from a Chinese company.

Market effects and interactions

The latest measures affect many more companies and will allow the US to assess whether other companies are forwarding chips to Huawei for its AI processor.

Following the letter, TSMC has notified affected customers that it is suspending chip shipments starting Monday, the person said.

Meanwhile, the Commerce Department has not commented.

“TSMC has had regular consultations with the government on export control issues and has made it clear that it will comply with domestic and international regulations,” Taiwan’s Ministry of Economic Affairs said in a statement, referring specific questions to TSMC.

A TSMC spokesperson also declined to comment other than to say it was a “law-abiding company…committed to complying with all applicable rules and regulations, including applicable export controls.”

The Commerce Department notice – known as a “has been advised” letter – allows the US to bypass lengthy drafting processes and quickly impose new licensing requirements on specific companies.

Ijiwei, a Chinese media site covering the semiconductor industry, reported Friday that TSMC has notified Chinese chip design companies that it would suspend chips of 7 nanometers or lower for AI and GPU customers starting Nov. 11.

The action comes as both Republican and Democratic lawmakers have expressed concerns about the inadequacy of export controls on China and their enforcement by the Commerce Department.

In 2022, the Commerce Department sent informed letters to Nvidia and AMD restricting their ability to export top AI-related chips to China, and to chip equipment makers such as Lam Research, Applied Materials and KLA to use tools to make advanced chips limited to China.

The restrictions in those letters were later turned into rules applicable to companies outside the country.

Delayed export rules

The US has delayed updating rules on technology exports to China. As reported in July, the Biden administration issued new rules for some foreign exports of chip manufacturing equipment and planned to add about 120 Chinese companies to the Commerce Department’s list of restricted entities, including chip factories , toolmakers and related companies.

But despite plans for an August release and later tentative target dates for publication, the rules have still not been issued.