AI Chip Freeze: US Slams Brakes on TSMC's China Shipments Secret Order

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US Imposes Immediate Restrictions on Advanced Chip Shipments to China

The United States has taken decisive action to curb the flow of advanced semiconductor technology to China, ordering Taiwan Semiconductor Manufacturing Co (TSMC), the world's leading chipmaker, to immediately cease shipments of specific high-performance chips to Chinese customers. These chips, crucial for artificial intelligence (AI) applications and advanced computing, are at the heart of growing concerns regarding technological competition and national security.

This directive, delivered through an is informed letter from the Department of Commerce, allows the US government to swiftly implement new licensing requirements, bypassing the typically lengthy rule-making process. This expedited approach underscores the urgency with which the US views this matter.

The order specifically targets chips with 7-nanometer or more advanced designs, the cutting edge of semiconductor technology. These chips are primarily used in AI accelerators and Graphics Processing Units (GPUs), powering the complex computations required for machine learning, data analysis, and other high-performance computing tasks. Restricting access to these chips aims to limit China's progress in these strategically important fields.

This action follows recent reports that a TSMC-manufactured chip was discovered within a Huawei AI processor. Huawei, a Chinese telecommunications giant, is already on a US trade blacklist, requiring suppliers to obtain licenses for any shipments. Licenses related to AI advancements are highly unlikely to be approved, further tightening the restrictions around Huawei's access to critical technology.

While the exact circumstances surrounding the presence of the TSMC chip in the Huawei processor remain unclear, the discovery undoubtedly fueled concerns within the US government. This incident highlights the challenges of enforcing export controls and underscores the determination of some companies to circumvent existing restrictions.

The US government's move comes amidst growing bipartisan concern in Congress regarding the effectiveness of current export controls on China and their enforcement by the Commerce Department. Lawmakers have been pushing for stricter measures to prevent sensitive technologies from falling into the hands of potential adversaries.

This latest action against TSMC follows a pattern of similar restrictions imposed on other major players in the semiconductor industry. In 2022, Nvidia and AMD, leading designers of GPUs, received is informed letters restricting their exports of top AI-related chips to China. Similarly, major chip equipment manufacturers like Lam Research, Applied Materials, and KLA faced restrictions on exporting tools used to produce advanced chips.

These earlier restrictions, initially implemented through is informed letters, were later formalized into broader rules impacting the entire industry. This suggests that the current restrictions on TSMC may also evolve into more comprehensive regulations in the future.

The Biden administration has been working on drafting new rules regarding foreign exports of chipmaking equipment and plans to add numerous Chinese companies to the Commerce Department's restricted entity list. This list includes chipmaking factories, toolmakers, and related companies, further broadening the scope of export controls.

While these new rules were initially expected to be released earlier this year, they have yet to be published. The current action against TSMC, however, demonstrates the administration's willingness to take immediate steps to address perceived national security risks, even as broader regulatory changes are still under development.