US orders TSMC to stop supplying AI chips to China

The United States is tightening restrictions on technology exports to China as part of its ongoing struggle for dominance in artificial intelligence and semiconductor technologies. According to Reuters sources, Taiwan Semiconductor Manufacturing has been ordered to halt shipments of advanced AI chips to China, with the order taking effect on Monday.

The move is part of a broader strategy to prevent China from acquiring advanced technology that can be used for military purposes or for the development of artificial intelligence.

The U.S. Commerce Department sent TSMC $TSM a letter ordering an immediate halt to exports of certain advanced chips to China. This regulation particularly affects chips manufactured using 7nm technology or more advanced processes that are critical for applications aimed at accelerating computing power for artificial intelligence or graphics computing. It is these chips that play a key role in China's AI applications, including advanced processors and graphics cards that can be used in many areas from commercial projects to military technology.

TSMC, one of the world's largest semiconductor manufacturers, said it will comply with all applicable international and domestic laws and regulations, including export restrictions. The restrictions focus on chips designed specifically for Huawei, the Chinese telecommunications and technology giant, which has been included on a list of companies subject to strict restrictions on technology exports to the U.S. and some other countries since 2019.

US authorities took the step after it was discovered that a chip made by TSMC was used in Huawei's Ascend 910B AI processor. This processor, developed for computing-intensive applications, has become one of the most advanced AI chips on the Chinese market. Analysis by research firm Tech Insights revealed that the chip was sourced from TSMC, which may have violated existing export restrictions.

Thus, TSMC was forced to cut off chip supplies not only to Huawei, but also to other Chinese firms such as Sophgo, another AI chip design company. Indeed, Sophgo uses chips with similar specifications to those identified in Huawei's products. The United States has made use of "is informed" letters, a tool that allows new licensing requirements to be quickly introduced for specific companies without having to go through the complex process of approving new rules.

These new restrictions come at a time when both Republican and Democratic lawmakers in the United States are expressing concerns that current regulations are not enough to stop advanced Chinese AI projects. For example, in 2022, the Department of Commerce sent similar warning letters to Nvidia and AMD, restricting the export of their cutting-edge AI chips to China. Similar restrictions were also issued against semiconductor equipment manufacturers such as Lam Research, Applied Materials, and KLA, which were intended to prevent the supply of tooling for the production of these advanced chips to China.

For the United States, restricting exports of advanced chips is a key tool in its efforts to maintain its technological dominance over China, which has emerged as a strong player in AI and advanced technologies in recent years. The U.S. government is concerned that Chinese access to these advanced chips and technologies could significantly strengthen China's military capabilities and put the United States at a disadvantage.

Although the United States had already planned to introduce further measures against Chinese imports of chips and technology in 2023, no final rules have yet been issued. These rules are expected to apply to more than 120 Chinese companies related to the production of chips and semiconductor manufacturing tools. This list of firms is also expected to include major Chinese chip factories and their suppliers, according to US officials.

The current situation suggests that the struggle for supremacy in artificial intelligence and semiconductor technology between the United States and China will become even more heated in the coming years. While the United States is tightening its grip, China is investing in the development of its own technologies with a view to becoming self-sufficient.

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Source: Yahoo Finance, Reuters.