- TSMC will stop producing chips IA advanced for Chinese companies due to US restrictions.
- They will only be able to manufacture chips with older processes, which will affect AI performance.
- The measure seeks to curb China's technological advance in Artificial Intelligence.
- Companies like Huawei and Alibaba will see their chip production severely affected.
TSMC has decided to stop manufacturing advanced artificial intelligence chips for its customers in China. This move is primarily driven by increasing restrictions imposed by the US government, which aims to limit China's access to cutting-edge technology. Starting next Monday, the technology TSMC uses in its 7-nanometer and smaller nodes will no longer be available to Chinese customers, a decision that further complicates trade relations in the semiconductor sector.
This move by TSMC will profoundly affect numerous Chinese technology companies, such as Alibaba and Baidu , which had invested heavily in developing artificial intelligence chips for their cloud operations. But it's not just the Chinese giants that will be impacted; local startups that rely on manufacturing these chips to remain competitive in this emerging sector will also be affected.
The decision is directly linked to the restrictions the United States has implemented on semiconductor technology , in a context where Washington seeks to curb China's advance in artificial intelligence. These restrictions not only affect chip exports by US companies like Nvidia , but also limit the operations of companies from other countries, such as TSMC, when their products use US manufacturing technology.
Why does the United States restrict access to these technologies?
For several years, the United States has increased its control over semiconductor technologies that could end up in Chinese hands, citing national security concerns. Washington has repeatedly expressed its fear that these technologies could be used for military purposes, including the development of autonomous weapons and large-scale cyberattacks. Furthermore, it is suspected that some Chinese companies have been acquiring chips indirectly through intermediaries or companies not included on the US sanctions lists, creating concern within the US administration.
Over the past year, the United States has strengthened its export control policies, including restrictions on shipments of advanced GPU chips, essential for artificial intelligence, and sanctions against companies like Huawei for violating these regulations. Pressure on TSMC and other companies has been constant, with frequent reviews by the U.S. Department of Commerce.
Impact on the Chinese semiconductor industry
The blow to the Chinese industry is significant, as TSMC is one of the few companies capable of producing chips using such advanced processes . Companies like SMIC , China's leading semiconductor manufacturer, do not yet have the capacity to produce chips with nodes as small as the 7 nanometers required by advanced artificial intelligence. Consequently, China's ability to advance in this technology will be significantly diminished, forcing it to rely on older processes that do not offer the same performance.
This doesn't just affect large tech corporations. Startups in China designing their own AI chips relied on TSMC for production and will now have to look for alternatives that may not offer the same quality or efficiency. Companies like Alibaba and Baidu are so dependent on TSMC that a significant slowdown in the launch of their upcoming AI products is expected due to this technological constraint imposed on the supply chain.
The US and its involvement in semiconductor technology
The US influence over China's access to advanced semiconductors has been clear in this case. Even chip supply contracts with the Taiwanese manufacturer would be subject to US government approval to ensure the technology is not used for purposes Washington deems inappropriate. In fact, further sanctions are expected under the new US administration.
The US Commerce Department's investigation into how TSMC chips ended up in Huawei 's hands , despite existing sanctions, has also increased the pressure on the Taiwanese company. For TSMC , complying with US regulations is paramount not only to avoid sanctions but also to protect its access to the North American market, which represents a very high percentage of its revenue.
The semiconductor industry in China has been dealt a severe blow by TSMC's decision , as it will not only slow the development of artificial intelligence technologies but also affect other technological areas that rely on these advanced processors. As a result, Chinese companies are expected to turn to local manufacturers, such as SMIC, whose production volume and capacity are insufficient to meet demand, and which also fail to offer the same quality.
Despite the difficulties, China is expected to continue to look for ways to overcome this technological barrier, either through local development or collaboration with other countries. However, the short-term impact will be undeniable, especially for large technology corporations and startups that rely on the most advanced chips to compete in the global market.
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