• TSMC will stop offering some of its most advanced AI chips to Chinese customers, according to reports.
• The US has restricted China’s access to advanced technology.
• The move is not expected to affect TSMC’s earnings, sources told the FT.

Taiwan Semiconductor Manufacturing Company has informed its Chinese customers that it will stop supplying them with its most advanced artificial intelligence chips, according to multiple reports.

As of Monday, TSMC will no longer manufacture AI chips at advanced process nodes of 7 nanometers or smaller for Chinese firms, three sources familiar with the matter said. FT.

TSMC previously supplied chips to tech giants such as Alibaba and Baidu, which are leading China’s efforts to create a domestic alternative to US-based Nvidia, the world’s most valuable company.

Any future supply to Chinese companies would be subject to an approval process that would likely include Washington, two of the people told the FT.

TSMC is The largest company in Taiwan and the world’s largest independent semiconductor foundry. The decision would not have a major impact on TSMC’s revenuesaid the people.

The move comes ahead of a new wave of export controls on chip shipments to China expected to be introduced by the Biden administration in the coming months.

“We want to start mitigating before there are strong, structured regulations,” a person familiar with the matter told the FT.

TSMC and other chipmakers are already barred from doing business with certain Chinese technology companies without US government approval. The policy is part of a series of sanctions and export controls aimed at restricting Chinese firms’ access to advanced technologies in the interest of national security.

TSMC’s supply chain has recently come under pressure after it was reported that the company’s chips were found in products produced by Huawei Technologies, which is under US export control.

The US Commerce Department is investigating the incident, and a source told the FT that Friday’s decision was influenced by the need to tighten internal controls.

TSMC will also face a potentially difficult relationship with the incoming US president.

The success of Taiwan’s chip manufacturing sector is a sore point for President-elect Donald Trump. He accused the country of taking US chip business and suggested that TSMC would move production back home after receiving billions of dollars in subsidies from Washington to build manufacturing centers in the US.

TSMC told Reuters on Friday that its U.S. investment plan “remains unchanged”.

The decision to stop supplying high-powered chips to Chinese customers “was not a show for Trump, but certainly designed to emphasize that we are the good guys and not acting against US interests,” a source told the FT.

We are a “law-abiding and committed company
to comply with all applicable rules and regulations, including applicable export controls,” TSMC said in a statement to the FT.

TSMC did not immediately respond to Business Insider’s request for comment.

News of TSMC suspending production was first reported by Chinese media site ijiwei.com.