TAIPEI (Taiwan News) — Taiwan Semiconductor Manufacturing Co. (TSMC) will halt production of advanced AI chips for China following orders from the US on Monday (Nov. 11).

The US Commerce Department instructed TSMC to stop shipping advanced chips for AI applications to Chinese customers, according to a source cited by Reuters. In a letter to TSMC, the Commerce Department outlined new export restrictions, which take effect on Monday.

TSMC has informed Chinese chip design firms that it is suspending manufacturing of chips at advanced process nodes of 7 nanometers or smaller for AI accelerators and graphics processing units (GPUs), reported the Financial Times. The restrictions do not affect companies making chips for mobile, communication, and connectivity-related uses, and the overall impact on TSMC’s revenue is expected to be minimal, sources indicated.

The new restrictions could impact Chinese companies such as Baidu and Alibaba, which have invested in producing their most advanced AI chips in Taiwan.

The policy change follows the discovery of a TSMC chip in a Huawei product in late October, suggesting a potential breach of export controls. The US Commerce Department blacklisted Huawei in May 2019 by placing it on the “Entity List,” and expanded restrictions in 2020 to block foreign sales of chips to the company.

“The move is to tighten the scrutiny over possible attempts to circumvent US export controls,” a source said. In a statement, TSMC affirmed its commitment to complying with all rules and regulations, including export controls, set by the US.

The new restrictions are part of US efforts to restrict China's access to advanced AI technology. Future TSMC shipments to Chinese clients may require approval from Washington.