Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest chip contract manufacturer, will reportedly stop shipping 7 nanometer and below semiconductors to Chinese customers that make artificial intelligence (AI) chips or graphic processing units (GPUs).
The decision, effective from November 11 in line with US sanctions, is aimed at blocking China’s Huawei Technologies from being able to place orders with TSMC via third parties, mainland IT website Jiwei.com reported on November 8.
However, TSMC will still be able to supply 7nm and below chips to Chinese customers that make chips for use in automobiles and smartphones.
TSMC said it has no comment on the reports, saying only it is law-abiding and strictly complies with all applicable laws and regulations, including applicable export control regulations.
Chinese fabless chip makers that use TSMC’s manufacturing services to make AI/GPU chips include Alibaba’s T-Head, Baidu’s Kunlunxin, Iluvatar, Enflame, MetaX, Black Sesame International, Jaguar Micro, Nio, Xiaopeng and Horizon Robotics, according to TMTPost.com, a Chinese IT news website.
Three major Chinese AI chip makers, including Cambrian Technologies, Biden Intelligent Technology and Moore Threads Technology, had used TSMC’s foundry services until they were added to the US Commerce Department’s Bureau of Industry and Security’s (BIS) “Entity List” in 2023.
However, it’s unclear whether these three Chinese firms have continued to place orders with TSMC via third parties to dodge the sanctions. On November 8, the Shanghai-listed shares of Cambrian fell 9.5% while the Shenzhen-listed shares of Horizon dropped 2.7% after Jiwei.com published its report.
At the same time, shares of Chinese chipmakers including Semiconductor Manufacturing International Corp (SMIC), Dawning Information Industry Co Ltd (Sugon) and Naura Technology Group surged.
In the third quarter, revenue from making 3nm, 5nm and 7nm chips accounted for 20%, 32% and 17% of TSMC’s total revenue, respectively. The proportion of TSMC’s revenue from sales to China was about 11% in the third quarter of 2024, compared with 12% for the whole year of 2023.
Wafers destroyed
Jiwei.com’s report came after TechInsights, a Canada-based information platform for the chip industry, said in a report on October 9 that it found the Ascend 910B chip on a Huawei Atlas 300T A2 AI training card.
TSMC reportedly suspended shipment of chips to Chinese fabless chip maker Xiamen Sophgo, a unit of the bitcoin mining equipment supplier Bitmain, in mid-October and reported the case to the US Commerce Department. Sophgo and Bitmain have denied any business relationship with Huawei.
Jiwei.com said on November 8 that all the wafers involved in this incident have been destroyed by TSMC while it’s unclear whether the involved Chinese chipmakers can place more orders with TSMC.
It added that Chinese chip designers now need to wait for the detailed shipment rules, which are being discussed by TSMC and the US Commerce Department, and then apply for licenses if they want to use TSMC’s facilities to “tape out” or produce their AI chips and GPUs, even though these products do not violate the US export rules. “Taping out“ is a procedure that makes sample chips before mass production.
“I think it’s a good thing that TSMC will stop making 7nm and more advanced chips for Chinese customers,” Xiang Ligang, an IT expert with the Research and Development International, a think tank under the Chinese Academy of Social Sciences, says in a Weibo post.
“It is only at an early stage that Chinese firms are designing their GPUs and auto chips. It’s natural that they prefer to work with TSMC,” Xiang says. “Now their orders are rejected by TSMC and they will then be taken by Chinese chip foundries.”
“Xiang Ligang seems to have underestimated the impact of TSMC’s latest decision,” a Guangdong-based columnist using the pseudonym “Xinyifei” says in an article. “Given that the yield of China’s 7nm chip-making processes remains unknown, it is impossible that Chinese foundries can satisfy the demand of all local chip designers.”
The writer says TSMC now dominates the market for 7nm and below chips while South Korea’s Samsung is lagging far behind in terms of yields. He says China’s SMIC can make 7nm chips but it has limited production capacity and low yields.
“In the short run, many Chinese fabless chip makers that make 7nm AI chips will have to shut down or downsize,” he opines.
More curbs ahead
Some commentators said the Biden administration may further tighten its and its allies’ chip export rules in the coming few months before Donald Trump, seen by many in the Chinese media as a China hawk, takes office on January 20, 2025.
Meanwhile, the coming debut of Huawei’s Mate70 smartphone may prompt the US Commerce Department to strengthen its chip export rules. Chinese media have said Huawei may launch the Mate70 on November 18 or 20.
They said the flagship product will use HiSilicon’s 7nm Kirin 9100 chip, which is said to match the performance level of Qualcomm’s Snapdragon 8 Gen 2 and 8+ Gen 1 for computing processing unit (CPU) and GPU, respectively.
But Huaweicentral.com said on November 9 that Huawei may use the previously launched Kirin 9010 chip in the Mate 70 as it has failed to secure enough Kirin 9100 chips.
In August 2023, US Commerce Secretary Gina Raimondo was surprised and dismayed by the launch of Huawei’s Mate60 smartphone during her China trip. TechInsights later found that the Kirin 9000s chip inside the Mate60 was made by SMIC with its 7nm (N+2) process.
Read more: China boxed out of high-NA lithography race to 1nm chips
Read more: China’s Sophgo, Bitmain deny ties with Huawei’s supply chain
