US ordered TSMC to halt shipments to China of chips used in AI applications, source says

NEW YORK/SINGAPORE – The United States has ordered Taiwan Semiconductor Manufacturing Company (TSMC) to halt shipments of advanced chips that are often used in artificial intelligence (AI) applications to Chinese customers, starting on Nov 11, according to a person familiar with the matter.

The Department of Commerce sent a letter to TSMC imposing export restrictions on certain sophisticated chips, of seven nanometre or more advanced designs, destined for China that power AI accelerator and graphics processing units, the person said.

The US order, which is being 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 Reuters reported in October. Tech research firm Tech Insights had taken apart the product, revealing the TSMC chip and apparent violation of export controls.

Huawei, at the centre of the US action, is on a restricted trade list, which requires suppliers to obtain licences to ship any goods or technology to the company. Any licence that could aid Huawei’s AI efforts would likely be denied.

TSMC suspended shipments to China-based chip designer Sophgo after its chip matched the one found on the Huawei AI processor, sources told Reuters in October.

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

The latest clampdown hits many more companies and will allow the US to assess whether other companies are diverting chips to Huawei for its AI processor.

As a result of the letter, TSMC notified affected clients that it was suspending shipments of chips from Nov 11, the person said. The Commerce Department declined to comment.

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

A spokesperson for TSMC also declined to comment beyond saying that it was a “law-abiding company... committed to complying with all applicable rules and regulations, including applicable export controls”.

The Commerce Department communication – known as an “is informed” letter – allows the US to bypass lengthy rule-writing processes to quickly impose new licensing requirements on specific companies.

The action comes as both Republican and Democratic lawmakers have raised concerns about the inadequacy of export controls on China and the Commerce Department’s enforcement of them.

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

Those restrictions were later turned into rules that apply to companies beyond the letter recipients.

The US has been delayed in updating rules on tech exports to China. Reuters reported in July that the Biden administration drafted new rules on some foreign exports of chipmaking equipment and planned to add about 120 Chinese companies to the Commerce Department’s restricted entity list, including chipmaking 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. REUTERS