Taiwan Semiconductor Manufacturing Company (TSMC), one of the world’s leading semiconductor manufacturers, has suspended the production of advanced artificial intelligence chips for China-based technology companies. This decision by TSMC will have serious impacts on Chinese customers affiliated with the company, which is an important hardware provider in artificial intelligence-focused projects. According to the Financial Times, the Taiwan-based manufacturer will specifically stop the production of 7-nanometer and below processors and require US government approval for such orders from its China-based customers.
This decision is thought to be related to Huawei’s use of chips produced by TSMC in prohibited hardware and the suspicion of violation of sanctions imposed by the US Department of Commerce. While TSMC is taking steps to comply with trade sanctions imposed by the United States in 2020, it is pursuing a policy of limiting Chinese companies’ access to advanced semiconductors.
According to the findings of Canadian research company TechInsights, chips produced by TSMC were detected in Huawei’s high-performance artificial intelligence accelerator devices. This situation was considered to be contrary to the trade sanctions initiated by the USA against Huawei in 2020. TSMC shared TechInsights’ findings with the US Department of Commerce and stated that it does not have a direct business relationship with Huawei. US sanctions on chip supply directly affect technology companies not only based in China, but also in the US and Europe. Within the scope of these sanctions, the supply licenses of giant US-based companies such as Intel and Qualcomm to Chinese companies were canceled.
TSMC’s suspension of advanced chip production for its Chinese customers is interpreted as a strategic move to preserve its relations with the USA. The US government’s desire to control access to technology fuels competition with China, especially in artificial intelligence and defense technologies. This new policy of TSMC is seen as part of its effort to show that it is in line with US interests.
It is expected that TSMC’s decision will have one of the biggest effects on China’s developments in artificial intelligence technologies. China-based technology giants such as Baidu aimed to develop high-performance systems using TSMC’s advanced chips in artificial intelligence projects. While sub-7 nanometer chips are of critical importance in artificial intelligence applications, the difficulty for China-based companies to access these chips will make it difficult for their projects to progress. It also seems likely that China will accelerate its efforts to strengthen its own semiconductor manufacturing infrastructure, but it will not be easy to develop alternatives that can produce high-quality chips like TSMC in the short term.
TSMC may cause a supply crisis in China with this move
In this period when the USA is tightening restrictions on technology access to Chinese companies, the difficulty in accessing advanced semiconductors offered by global leaders such as TSMC for Chinese companies may lead to a large-scale supply crisis in the country. For example, investment in China’s government-backed semiconductor projects could gain momentum to create an independent ecosystem in this field. However, the development of technologies that require advanced semiconductor production capacity seems to be a challenging process for China in the short term.
This semiconductor technology war between the US and China continues to create uncertainty in the global chip industry. This restrictive decision taken by TSMC for Chinese companies may cause not only China but also other countries and companies to reconsider their technology supply strategies.