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U.S. Orders TSMC to Halt AI Chip Shipments to China Amid Escalating Tech Export Controls

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The U.S. government has directed Taiwan Semiconductor Manufacturing Co. (TSMC) to cease shipments of advanced chips used in artificial intelligence (AI) applications to Chinese customers as of Monday. According to a source familiar with the order, the U.S. Department of Commerce issued a notice to TSMC restricting the export of specific advanced chips, including 7-nanometer designs and below, often deployed in AI accelerators and GPUs, to Chinese entities.

This new export restriction follows recent revelations by TSMC regarding one of its chips found within a Huawei AI processor. Tech Insights, a technology research firm, had disassembled the Huawei processor and discovered TSMC’s involvement, potentially indicating an export control breach. Huawei, which is on the U.S. restricted trade list, is required to secure special licensing for any U.S.-derived technology imports. Such licenses are unlikely to be granted if they would benefit Huawei’s AI capabilities.

In response to the U.S. directive, TSMC has begun notifying Chinese clients affected by the suspension of AI and GPU chip shipments, including Sophgo, a China-based chip designer that used similar TSMC technology in a Huawei product. It remains unclear how the chip ended up in Huawei’s Ascend 910B AI processor, one of China’s most advanced AI chips.

The latest U.S. clampdown comes as lawmakers on both sides of the aisle have voiced concerns about the efficacy and enforcement of export controls on China. In recent years, the Commerce Department has issued similar restrictions to companies like Nvidia, AMD, and several chip equipment manufacturers to limit AI-related technology exports to China. Restrictions initially introduced via “is-informed” letters, like those now sent to TSMC, were later formalized into broader regulatory rules affecting additional companies.

This move reflects Washington’s continuing strategy to limit China’s access to advanced AI and chipmaking technologies. The Biden administration has drafted new export control rules targeting Chinese chipmaking and related companies and aimed to update the Commerce Department’s entity list, which would include over 120 Chinese companies. However, despite these plans, the proposed rules remain delayed, missing anticipated release dates earlier this year.

 

TSMC Maintains U.S. Investment Strategy Following Trump Election Win

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Taiwan Semiconductor Manufacturing Co. (TSMC) confirmed that its U.S. expansion plans remain unchanged despite Donald Trump’s recent election victory. In an emailed statement on Thursday, TSMC assured that its $65 billion investment in new semiconductor plants in Arizona is proceeding as planned, though it did not offer further details.

TSMC, the world’s leading contract chipmaker and a major supplier for companies like Apple and Nvidia, has been expanding its U.S. presence as part of an extensive strategy to bolster global production. Trump’s campaign, which included criticisms of Taiwan for “taking American semiconductor jobs,” does not appear to impact TSMC’s plans. In April, TSMC’s U.S. branch secured a preliminary $6.6 billion subsidy agreement with the U.S. Commerce Department to support its advanced semiconductor manufacturing in Phoenix, Arizona.

The Taiwanese chipmaker’s steady progress aligns with recent moves under the U.S. Chips and Science Act, a significant part of Washington’s efforts to strengthen domestic chip production. Both TSMC and other major players like GlobalFoundries are expected to finalize their funding from the Biden administration soon, as confirmed by sources close to the matter.

In terms of market performance, TSMC’s stock has held strong amidst Trump’s re-election. The company’s American Depositary Receipts (ADRs) closed up by 4.1% on Thursday, fueled by Nvidia’s record stock performance, which lifted the broader semiconductor sector. Nvidia’s shares hit an all-time high, propelling the chip industry’s valuation over $3.6 trillion for the first time in history as demand for AI technologies continues to surge.

 

Trump Accuses Taiwan of Undermining U.S. Chip Industry: Election Impacts on Semiconductor Sector

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In a recent appearance on the Joe Rogan Experience podcast, former President Donald Trump criticized Taiwan, accusing it of “stealing” the U.S. semiconductor business. Trump argued that Taiwan has leveraged its chip production dominance unfairly, targeting Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading chipmaker and a crucial supplier for companies like Nvidia and Apple. Trump’s remarks come amid heightened geopolitical tensions with China, which regards Taiwan as part of its territory and has increased military activities around the island.

Shares of TSMC dropped by 4.3% following Trump’s comments and renewed his stance on imposing tariffs on Taiwanese chip imports if elected. Analysts warn that tariffs could significantly impact TSMC and the U.S. tech industry’s reliance on Taiwanese chip production.

Impact on the Semiconductor Supply Chain

Taiwan manufactures over 90% of advanced semiconductors, with tech giants like Amazon, Google, and Microsoft sourcing chips from TSMC. Despite U.S. efforts to bolster its own semiconductor infrastructure through the CHIPS Act, which allocates funding to domestic production, alternatives to TSMC’s advanced production capacity remain limited. U.S.-based Intel has faced delays and competition challenges, although its new U.S. foundries are expected to benefit from CHIPS Act funding.

The Biden administration has directed nearly $7 billion from the U.S. Commerce Department toward TSMC’s Arizona facility, expected to start volume production by 2025. However, Trump’s comments on foreign companies potentially misusing U.S. funds reflect concerns over U.S. reliance on Taiwan’s chip output.

Tariff and Trade War Implications

Trump’s proposal for tariffs on Taiwanese chips could create cost increases across the chip supply chain. Citi analysts estimate that implementing tariffs would require complex audits, given the variety of chips across thousands of devices. Historically, similar tariffs led to increased costs and broader trade tensions, which, according to Moor Insights & Strategy CEO Patrick Moorhead, could elicit retaliatory tariffs from China. A new trade war might strain U.S.-China relations and further restrict companies like Micron, which already face barriers in the Chinese market.

Despite Trump’s stance, experts warn that even a victory by Vice President Kamala Harris would not exempt the industry from trade restrictions. Under the Biden administration, stringent export controls on semiconductor sales to China were implemented, particularly affecting Nvidia, whose revenue from China plummeted after controls reduced its China sales share from 25% to under 10%.

Outlook for U.S. Semiconductor Strategy

Trump’s criticisms reflect broader calls for self-reliance within the semiconductor sector, mirroring concerns over U.S. vulnerability due to Taiwan’s dominance in chip manufacturing. Proposals to further support domestic companies like Intel, Texas Instruments, and Global Foundries align with Trump’s America-first trade strategy, which could prioritize U.S. fabs and incentivize domestic chip production if he is re-elected.

U.S. tech markets remain volatile amid these policy uncertainties. Following Trump’s comments, semiconductor stocks reacted, with TSMC declining and U.S.-based chipmakers showing gains on the prospect of potential government backing. However, tariffs and trade restrictions could have sweeping consequences, potentially leading to higher costs and supply chain disruptions for the global tech sector.