TSMC halts advanced chip shipments to Chinese AI companies

Semiconductor giant TSMC is expected to stop supplying chips made with 7 nm or smaller processes to customers in China that are developing AI processors or GPUs. The move is reportedly to ensure it remains compliant with US export restrictions.

The Taiwan-based megacorp, the largest semiconductor contract manufacturer worldwide, is said to have notified AI/GPU chip companies in China that it will halt shipments to them of 7 nm and more advanced silicon, starting from November 11.

This follows events last month when TSMC reportedly tipped off US officials that a Chinese customer appeared to be trying to circumvent export controls against China-based tech firm Huawei by placing orders for a chip resembling Huawei's Ascend 910B GPU.

It was later claimed that the biz halted all shipments to the customer in question, alleged to be chip designer Sophgo, although the latter denied the claims.

Now TSMC is suspending production of advanced silicon for Chinese clients developing products aimed at high-performance computing, GPUs, and AI-related applications, as reported by Nikkei Asia and Taiwan-based industry watcher TrendForce, which cites Chinese-language media outlet ijiwei.

This will not affect Chinese customers wanting 7 nm chips from TSMC for other applications such as mobile and communications, according to Nikkei, which said the overall impact on the chipmaker's revenue is likely to be minimal.

TrendForce further cites another China-based source who claims the move was at the behest of the US Department of Commerce, which informed TSMC that any such shipments should not proceed unless approved and licensed by its BIS (Bureau of Industry and Security). We asked the agency for confirmation.

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Any moves by the silicon supremo is likely to be out of caution to pre-empt accusations from Washington that it isn't doing enough to prevent advanced technology from getting into the hands of Chinese entities that have been sanctioned.

As TrendForce notes, it "highlights the foundry giant's delicate position in the global semiconductor supply chain amid the heating chip war between the world's two superpowers."

For example, TSMC was awarded billions under the US CHIPS and Science Act toward building fabrication plants in the state of Arizona, an arrangement that may be reviewed under the Trump administration, it was suggested earlier this week.

TSMC neither confirms nor denies the reports. A spokesperson told us: "TSMC does not comment on market rumor ... TSMC is a law-abiding company and we are committed to complying with all applicable rules and regulations, including applicable export controls."

The semiconductor maker recently reported a strong third quarter 2024 with revenue of $23.50 billion, an increase of 36 percent over the same period last year, with chip output from its most advanced process nodes – 3 nm and 5 nm – now accounting for more than half of that. ®