By Karen Freifeld and Fanny Potkin
NEW YORK/SINGAPORE (Reuters) – The United States ordered Taiwan Semiconductor Manufacturing Co to stop shipments of advanced chips to Chinese customers that are often used in artificial intelligence applications 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 chips, 7 nanometers or more advanced designs, destined for China that power AI accelerator and graphics processing units (GPUs), the person said. .
The US order, reported for the first time, comes just weeks after TSMC notified the Commerce Department that one of its chips had been found in a Huawei AI processor, as Reuters reported last month. Technology research firm Tech Insights took the product apart, revealing the TSMC chip and an apparent violation of export controls.
Huawei, at the center of the US action, is on a restricted trade list, which requires suppliers to obtain licenses to ship any products or technology to the company. Any license that could help Huawei’s AI efforts would likely be denied.
TSMC suspended shipments to China-based chip designer Sophgo after its chip matched the one found in Huawei’s AI processor, sources told Reuters last month.
Reuters could not determine how the chip ended up in Huawei’s Ascend 910B, launched in 2022, considered the most advanced AI chip available from a Chinese company.
The latest crackdown affects many more companies and will allow the United States to assess whether other companies are diverting chips to Huawei for its artificial intelligence processor.
As a result of the letter, TSMC notified affected customers that it would suspend chip shipments starting Monday, the person said.
The Commerce Department declined to comment.
“TSMC has held regular discussions with the government on export control issues and has made clear that it will comply with domestic and international regulations,” Taiwan’s Ministry of Economy said in a statement to Reuters, referring specific questions to TSMC.
A TSMC spokesperson also declined to comment beyond saying it was a “law-abiding company…committed to compliance with all applicable rules and regulations, including applicable export controls.”
The Commerce Department’s communication – known as a “be aware” letter – allows the United States to bypass lengthy rule-writing processes to quickly impose new licensing requirements on specific companies.
Ijiwei, a Chinese media site that covers the semiconductor industry, reported Friday that TSMC notified Chinese chip design companies that it would discontinue 7-nanometer or smaller chips for AI and GPU customers starting Nov. 11. .
The action comes as Republican and Democratic lawmakers have expressed concerns about the inadequacy of export controls in China and the Commerce Department’s enforcement of them.
In 2022, the Commerce Department sent informed letters to Nvidia (NASDAQ 🙂 and AMD (NASDAQ 🙂) restricting their ability to export major AI-related chips to China and chip equipment makers such as Lam Research (NASDAQ 🙂, Applied Materials ( NASDAQ 🙂 and KLA will restrict tools for making advanced chips to China.
The restrictions contained in those letters later became rules that apply to companies beyond them.
The United States has fallen behind in updating rules on technology exports to China. As Reuters reported in July, the Biden administration drafted new 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, tool makers and related companies.
But despite plans for an August release and tentative release dates thereafter, the rules have yet to be released.