The Taiwan Semiconductor Manufacturing Company (TSMC) has announced it will cease producing advanced AI chips for Chinese firms, according to a report by the Financial Times. The prestigious Taiwanese semiconductor giant has informed its Chinese customers that it will no longer manufacture chips using 7-nanometer technology or smaller. Effective from this Monday, any orders for such products will now need to go through an approval process, which is expected to involve oversight from the United States government.
This significant policy change appears to stem from TSMC’s discovery that Huawei had utilized its chips in AI accelerators without authorization. A Canadian research group, TechInsights, uncovered the presence of TSMC-manufactured components in Huawei’s hardware. This revelation pointed to a violation of U.S. trade restrictions established in 2020, which prohibited Huawei from accessing chips produced by foreign entities. The U.S. government recently tightened these restrictions further, revoking licenses granted to companies like Intel and Qualcomm that allowed limited supply of chips to Huawei.
In response to TechInsights’ findings, TSMC reported the matter to the U.S. Commerce Department, which has since launched an investigation into the situation. TSMC denied having any direct business relationship with Huawei and has also terminated sales to the intermediary client believed to have been funneling chips to the Chinese technology firm. Sources indicate that TSMC’s decision to stop manufacturing AI chips for all Chinese clients is likely an effort to align itself with U.S. trade policies and emphasize its commitment to compliance.
The decision is poised to create substantial challenges for Chinese companies relying on TSMC for AI hardware development. For instance, Baidu, which had plans to use TSMC’s advanced chips to build AI infrastructure, may need to explore alternative options. This development highlights TSMC’s critical role in the global semiconductor industry and underscores the escalating impact of U.S.-China trade tensions on technological progress and innovation. The suspension of chip production could reverberate across industries, marking a pivotal moment in the evolving dynamics of international technology and trade.
