Taiwan Semiconductor to Halt Advanced AI Chip Production for China

Taiwan Semiconductor Manufacturing Company (TSM, Financials) will stop producing advanced artificial intelligence chips for Chinese firms starting next week.

The ruling is in line with American initiatives to curtail China's scientific progress.

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Set to start on Monday, the suspension affects processors with process nodes of 7 nanometers or below. According to sources, future Chinese company development of such chips would probably depend on U.S. government clearance.

The stop comes as Taiwan Semiconductor seeks to enhance internal controls and be ready for perhaps new U.S.-based export restrictions.

Chinese technology companiesincluding Baidu (BIDU, Financials) and Alibaba Group Holding Ltd. (BABA, Financials)who have employed Taiwan Semiconductor's manufacturing capabilities are anticipated to be impacted by the move.

After a chip Taiwan Semiconductor supplied showed up in an AI processor created by Huawei, this month the company stopped exporting to Chinese chip designer Sophgo. Sophgo said that it has not done business with Huawei and that the U.S. Commerce Department's inquiry has none bearing on its activities.

With a 29.2% annual year-over-year growth in October sales, Taiwan Semiconductor said income amounted to around $9.8 billion in the third quarter.

This article first appeared on GuruFocus.