Authors: Karen Freifeld and Fanny Potkin
NEW YORK/SINGAPORE (Reuters) – The United States has ordered Taiwan Semiconductor Manufacturing Co to halt shipments of advanced chips to Chinese customers that are often used in artificial intelligence applications, starting from Monday (NASDAQ:), according to a person familiar with the matter.
The Commerce Department sent a letter to TSMC imposing export restrictions on certain sophisticated 7-nanometer or higher chips destined for China and used to power AI accelerators and graphics processing units (GPUs), the person added.
The U.S. order in question for the first time comes just weeks after TSMC notified the Commerce Department that one of its chips was found in a Huawei AI processor, Reuters reported last month. Research firm Tech Insights took the product apart, revealing the TSMC chip and an apparent export control violation.
Huawei, at the center of the United States’ operations, is on a restricted trade list that requires suppliers to obtain licenses to ship any goods and technology to the company. Any license that could aid Huawei’s artificial intelligence efforts would likely be rejected.
Last month, Reuters sources reported that TSMC had suspended shipments to Chinese chip designer Sophgo after its chip matched that found in Huawei’s AI processor.
Reuters was unable to determine how the chip ended up in Huawei’s Ascend 910B model released in 2022, considered the most advanced AI chip available from the Chinese company.
The latest crackdown hits many more companies and will allow the United States to assess whether other companies are funneling chips to Huawei for its AI processor.
As a result of the letter, TSMC notified affected customers that it was suspending shipments of chips from Monday, the person added.
The Commerce Department declined to comment.
A TSMC spokesman also declined to comment beyond saying it is a “law-abiding company… committed to complying with all applicable rules and regulations, including applicable export controls.”
The Commerce Department’s announcement – known as an “is advised” letter – allows the United States to bypass lengthy rulemaking processes to quickly impose novel licensing requirements on specific companies.
Ijiwei, a Chinese media outlet covering the semiconductor industry, reported on Friday that TSMC has notified Chinese chip design companies that it will suspend chips of 7 nanometers or below for AI and GPU customers from November 11.
The decision came after Republican and Democratic lawmakers raised concerns about China’s inadequate export controls and their enforcement by the Commerce Department.
In 2022, the Commerce Department sent information-laden letters to Nvidia (NASDAQ:) and AMD (NASDAQ:) restricting their ability to export top AI-related chips to China and to chip hardware manufacturers such as Lam Research (NASDAQ:), Applied Materials (NASDAQ:) and KLA to restrict advanced chip production tools to China.
The restrictions contained in these letters were later turned into rules applicable to companies outside them.
The United States delays updating regulations on technology exports to China. As Reuters reported in July, the Biden administration had developed novel rules on some foreign exports of chip-making 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.
However, despite plans for an August release and subsequent tentative release dates, the rules have still not been released.
