November 11, 2024 /SemiMedia/ — TSMC has notified its Chinese mainland AI chip clients that it will suspend shipments of chips using 7-nanometer (nm) and more advanced processes starting November 11, according to sources familiar with the matter.

The decision underscores TSMC’s complex role in the global semiconductor landscape amid escalating U.S.-China tech tensions. As a top semiconductor foundry, TSMC’s 7nm and below process technologies are considered industry-leading. The supply halt is expected to deal a major setback to AI and GPU companies in the Chinese mainland, potentially affecting their product performance and market position.

In the AI and GPU segments, advanced process technologies are critical to product capabilities. Losing access to TSMC’s advanced nodes may lead to higher costs and delays in product launches for these companies.

This decision could also lead to a restructuring of the supply chain. Chinese mainland chip design firms may need to look for alternative foundries, though local capacity for advanced processes remains limited. Such changes could have significant implications for the global semiconductor industry.

Importantly, the restrictions do not apply to all IC design firms from the Chinese mainland. The current controls are limited to AI and GPU-related chips, with smartphone and automotive semiconductors unaffected. TSMC is expected to work with the U.S. Department of Commerce on specific guidelines. AI and GPU chips that meet certain criteria may still be eligible for production at TSMC through a licensing process.