TSMC will reportedly stop making advanced AI chips for Chinese companies

Taiwan Semiconductor Manufacturing Company (TSMC) has suspended the production of advanced AI chips for Chinese companies, according to the Financial Times. The Taiwanese semiconductor chip manufacturer has reportedly notified its clients from China that it will stop producing AI chips for them, particularly models 7 nanometers and smaller, starting this Monday. If a Chinese company orders products that fall within that category, they’ll have to go through an approval process that’ll likely involve the US government.

The manufacturer’s new policy could be a direct result of its discovery that Huawei had used its chips in AI accelerators without its knowledge. A Canadian research firm called TechInsights was the one that notified the company that it discovered the presence of TSMC-manufactured products in Huawei’s hardware. It was a violation of the trade sanctions the US Commerce Department had imposed against Huawei way back in 2020 that prevented it from acquiring chips made by foreign firms. More recently, it revoked its licenses that allowed Intel and Qualcomm to manufacture chips for its devices.

TSMC reported TechInsights’ findings to the US Commerce Department, which is now investigating how it had happened. The company denied any working relationship with Huawei and also stopped selling its chips to the client it believes had been illegally forwarding them to the Chinese brand. The Times’ sources said that TSMC made the decision to suspend the production of AI chips for Chinese clients altogether, because it wants to show the US government that it’s “not acting against US interests.” Its new policy could have a big impact on the AI efforts of its Chinese clients. Baidu, for instance, had plans to build hardware for its AI business powered by a series of chips made by TSMC.