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TSMC to suspend production for some Chinese AI chip customers

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Taiwan Semiconductor Manufacturing Co. (TSMC) has notified several Chinese clients that it will suspend production of artificial intelligence (AI) and high-performance computing chips, according to sources reported by Nikkei Asia.

The sources indicate that affected Chinese customers are those working on high-performance computing, graphics processing units (GPUs), and AI applications using 7-nanometer (nm) or advanced chip technologies. However, this suspension will not impact Chinese customers producing chips for mobile, communications, or connectivity applications. TSMC anticipates that this move will have minimal impact on overall revenue.

According to Nikkei Asia, TSMC launched a review of clients using 7nm or better manufacturing processes after identifying attempts by some Chinese companies to circumvent U.S. export controls on Huawei Technologies. TSMC proactively notified the U.S. Department of Commerce about these clients.

One source stated that TSMC’s decision aims to mitigate risks of violating U.S. export controls and is unrelated to the recent U.S. presidential election, which saw Donald Trump re-elected. Another source revealed that Chinese clients with high-computing capacity chip designs must now seek approval from the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) before production at TSMC can proceed.

“The move is intended to tighten scrutiny on possible export control circumventions,” the source added. “Currently, most scrutiny responsibility falls on TSMC, but in the future, Chinese customers will bear more accountability.”

When asked for a statement, TSMC commented, “TSMC does not respond to market rumors. We are a law-abiding company committed to complying with all relevant rules and regulations, including export controls.”

Earlier reports from Jiwei, a Chinese media outlet, stated that TSMC would halt shipments of 7nm or more advanced technology products to Chinese AI chip clients starting next week.

According to TSMC’s annual report, the Chinese market comprised approximately 12% of its total revenue, which amounted to NT$2.16 trillion ($67.3 billion) last year. Meanwhile, the U.S. remains TSMC’s largest market, accounting for 65% of its revenue. In the most recent quarter, U.S. clients contributed 71% of TSMC’s revenue, while China accounted for 11%.

Washington has imposed export restrictions on Huawei due to alleged ties with the Chinese military—allegations which Huawei denies—and has applied broader restrictions to curb China’s ambitions in semiconductors. The U.S. has further enhanced export control enforcement in major Asian semiconductor hubs like Taiwan, Japan, and South Korea. This includes sending an export control officer to Taipei and deploying BIS officials to Taiwan periodically to aid companies in navigating complex export regulations.

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