U.S. Orders TSMC to Halt Shipments to China

By Karen Freifeld and Fanny Potkin
NEW YORK/SINGAPORE (Reuters) – The U.S. has directed Taiwan Semiconductor Manufacturing Co (TSMC) to stop shipments of advanced chips to Chinese customers starting Monday, particularly those chips often utilized in artificial intelligence applications.

According to a source, the U.S. Department of Commerce sent a letter to TSMC imposing export restrictions on sophisticated chips with 7-nanometer or more advanced designs headed for China. These chips power AI accelerators and graphics processing units (GPU).

This order, reported for the first time, follows TSMC's notification to the Commerce Department about a chip being found in a Huawei AI processor. A tech research firm, Tech Insights, revealed the TSMC chip in an analysis of the product, indicating a possible violation of export controls.

Huawei, which is at the center of the U.S. action, is included on a restricted trade list, necessitating that suppliers secure licenses to ship any goods or technology to the company. Licenses that might enable Huawei's AI advancements are anticipated to be denied.

Earlier, TSMC paused shipments to the China-based chip designer Sophgo after it was discovered that its chip closely resembled the one found in the Huawei AI processor. However, details on how the chip ended up on Huawei's Ascend 910B, recognized as the most advanced AI chip from a Chinese company, remain unclear.

The new restrictions impact numerous companies, providing the U.S. an opportunity to investigate possible diversions of chips to Huawei for its AI processor…

As a result of the letter, TSMC has informed its affected clients about the suspension of chip shipments starting Monday, according to the source. The Commerce Department has not commented on this matter, and TSMC has stated it is a "law-abiding company… committed to complying with all applicable rules and regulations, including export controls."

The communication from the Commerce Department, known as an "is-informed" letter, allows swift imposition of new licensing requirements on specific companies while avoiding lengthy rule-writing processes.

According to Ijiwei, a Chinese semiconductor media site, TSMC has alerted Chinese chip design companies of the suspension of 7-nanometer or lower chips for AI and GPU clients effective from November 11.

This move comes amid growing concerns from both Republican and Democratic lawmakers regarding the sufficiency of export controls on China and the enforcement by the Commerce Department.

In 2022, the Commerce Department had sent similar letters to Nvidia and AMD, limiting their ability to export leading AI-related chips to China, along with restrictions on chipmakers and equipment manufacturers.

While the U.S. has deliberated on updating tech export rules to China, plans announced in July to restrict about 120 Chinese companies, including chip manufacturing and toolmaking entities, have not yet been executed as expected.