The U.S. has tightened restrictions on foundries supplying 7nm and below chips to Chinese clients. According to a report from Economic Daily News, following TSMC’s suspension of services to restricted Chinese clients, rumors suggest that South Korea’s Samsung is also affected by U.S. restrictions, preventing it from offering such foundry services to Chinese firms.

Samsung’s foundry division has reportedly notified Chinese clients about the restrictions, according to the report. However, Samsung has declined to comment on these rumors.

As for Intel, since it is closely aligned with the U.S., the company is also expected to comply with U.S. regulations, as the report mentioned. This would lead to a comprehensive blockade of China’s effort to develop advanced AI chips, signaling a new chapter in the U.S.-China semiconductor confrontation, potentially reshaping the global semiconductor landscape.

The report pointed out that currently, only three companies—TSMC, Samsung, and Intel—are capable of providing foundry services below the 7nm process. China’s leading foundry, SMIC, claims to have 7nm production capability, but it lacks the necessary economies of scale and efficiency.

Citing industry sources, the report suggests that Alibaba’s AI chip subsidiary, T-Head, could be the most heavily impacted by the restrictions, indicating that, following Huawei, Alibaba has now also come under scrutiny by the White House. Along with T-head, other Chinese AI chip companies, such as Bitmain and Cambricon, are also likely to be impacted.

Fully owned by Alibaba, T-Head has made rapid progress in next-generation chip development, with its “Yitian” series reaching sub-5nm technology, as the report mentioned. The company claims that its technology supports applications across diverse fields, including AI in automotive, gaming, and scientific research.

The report indicated that as China’s path to self-developed AI chips encounters setbacks, it may be forced to rely on downgraded versions of AI chips from U.S. companies like NVIDIA and AMD to comply with American restrictions. This development, as the report noted, could undermine Beijing’s hopes of using domestically developed AI chips to circumvent U.S. limitations.

(Photo credit: Samsung)

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• [News] Four Key Takeaways on TSMC’s Reported Halt of 7nm and Below Chip Supplies to China
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According to Liberty Times, citing Chinese meida outlet TMTPost, as the U.S. has imposed sanctions on China’s semiconductor industry since 2019, over 22,000 Chinese chip companies have shut down as of the end of 2023.

The report pointed out that a large number of Chinese chip companies have gone out of business, mainly because many small and medium-sized companies lack the necessary core technologies and face difficulties overcoming technical barriers

Another issue is the lack of investment, particularly for smaller chip companies, as the report indicated. The U.S. restricts investment in China’s semiconductor industry, and under U.S. sanctions, European investors are also hesitant to invest in Chinese chip companies.

The report mentioned that while large companies have invested billions of dollars to secure alternative suppliers, and Huawei is said to have established a network of foundries to sustain its business, smaller chip companies lack the resources to keep up without government financial support.

On the other hand, China recorded a trade deficit in chips totaling USD 122 billion in the first seven months of 2024, highlighting its continued reliance on imported high-end chips, as the report noted.

According to the report, citing data from China’s General Administration of Customs, in the first seven months of this year, China imported 308.1 billion chips with a total value of approximately USD 212 billion, marking year-on-year increases of 14.5% in quantity and 11.5% in value compared to the same period in 2023, which suggests that Chinese companies were actively stockpiling high-end chips, such as high-bandwidth memory (HBM), ahead of U.S. export restrictions on these products.

Meanwhile, in the first seven months of this year, China exported 166.6 billion chips, mainly traditional chips used in automobiles, home appliances, and various consumer electronics, totaling USD 90 billion, with year-on-year increases of 10.3% in quantity and 22.5% in value, as the report pointed out.

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• [News] China’s Surge in Chipmaking Tool Purchases May Lead to Overcapacity Crisis of Legacy Chips
• [News] China’s Chipmaking Equipment Spending Likely to Drop below USD 40 Billion in 2025 amid U.S. Tensions

According to MoneyDJ, citing Reuters, the U.S. government is actively working to curb the development of China’s semiconductor industry.

Republican Congressman John Moolenaar, chair of the House Select Committee on the Chinese Communist Party, along with senior Democratic Congressman Raja Krishnamoorthi, jointly sent letters to five semiconductor equipment manufacturers: ASML, Applied Materials, KLA, Lam Research, and Tokyo Electron. The lawmakers requested information on sales to China, arguing that China is using advanced semiconductor equipment to strengthen its military and is supplying chips to the Russian military, thereby threatening international order and security, as the Reuters report noted.

The report from MoneyDJ indicated that the U.S. government intends to expand the scope of export controls, including tightening the Foreign Direct Product Rule (FDPR) to prevent China from obtaining advanced equipment for military purposes, which would prohibit the export of semiconductor equipment containing U.S. technology to China.

However, this legislation has been delayed due to strong opposition from Japan and the Netherlands, as it would significantly impact the operations of semiconductor equipment manufacturers, as the report from MoneyDJ indicated.

On the other hand, as reported by the Financial Times, TSMC has informed Chinese companies that it will cease production of the most advanced AI chips at 7nm or below for Chinese customers starting on November 11. This decision is seen as a direct response to concerns about China’s access to cutting-edge technology. The report suggests that TSMC’s tightening and cessation of advanced chip supplies to Chinese clients could set back the AI ambition of major Chinese tech companies such as Alibaba and Baidu.

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• [News] TSMC Reportedly to Halt 7nm and Below Chip Shipments to China’s AI Firms Next Week
• [News] China’s Chipmaking Equipment Spending Likely to Drop below USD 40 Billion in 2025 amid U.S. Tensions

(Photo credit: istock photo )

Under the pressure to speed up AI development, the White House, on October 24^th, announced the nation’s first-ever strategy for leveraging the power of AI while managing its risks to enhance national security, according to a report by the Washington Post, citing the remarks by national security adviser Jake Sullivan.

The memorandum, in which the roles of China and Taiwan have been highlighted, is instructing the Pentagon and intelligence agencies to boost their use of artificial intelligence, while prohibiting agencies from utilizing the technology in ways that “do not align with democratic values, the report noted.

Sullivan also emphasized that the country needs to accelerate the deployment of AI within the national security framework faster than its rivals, according to another report by Reuters. He stated that if the U.S. fails to implement AI more swiftly and thoroughly to enhance its national security, the nation risks wasting the advantage it has worked so hard to achieve.

It is worth noting that in the memo, the government is instructed to assist U.S. companies in safeguarding their AI technologies from foreign espionage and to continue efforts to diversify the supply chain for high-end computer chips essential for advanced AI initiatives, the majority of which are manufactured in Taiwan, the report suggests.

To hinder advancements in supercomputing and AI that could support the Chinese military, the U.S. implemented export controls on advanced chips and chip making equipment for China in 2022 and 2023, limiting shipments from companies such as AI accelerator giant NVIDIA.

The latest announcement, according to the Washington Post, following an executive order on AI signed by President Joe Biden in October 2023, reinforces the administration’s initiatives to counter technological competition from China and other adversaries.

In addition, this memo reportedly reflects the administration’s ongoing efforts to address concerns regarding the potential risks of AI while simultaneously promoting its use within the government and fostering continued innovation among Big Techs in the U.S.

According to the report, the military has historically been an early adopter of various AI applications, such as image-recognition algorithms that analyze satellite images to identify potential targets and autonomous cruise missiles that navigate complex terrains.

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• [News] Xiaomi Rumored to Have Taped out its First 3nm Chipset, Which Might be Launched Next Year
• [News] U.S. Set to Ban AI Investments in China, with Rules Expected Soon

China has been in the spotlight lately with its breakthroughs in semiconductors. Following the buzz that SMIC is said to produce 5nm chips for Huawei this year, Xiaomi is rumored to have taped out its first 3nm SoC. China’s efforts can also been seen by the surge of semiconductor patent applications, with the country’s filing in 2023-24 soaring by 42%, according to a report by The Register.

Citing the data from IP firm Mathys & Squire, the report notes that there is a 22% global increase in semiconductor patent applications, rising from 66,416 in 2022-23 to 80,892 in 2023-24.

It is worth noting that China’s semiconductor sector is rapidly advancing in response to U.S. export controls, while its semiconductor patent applications during 2023-24 showed the strongest growth among all regions, rising from 32,840 to 46,591 with a 42% year-over-year increase, according to The Register.

However, China’s surge in patent applications is not solely influenced by geopolitical factors. AI accelerators and high-performance chips have become highly sought after amid the AI boom, leading chipmakers around the world, including those in China, to rush to file patents for the next breakthrough in AI hardware, the report states.

An expert from Mathys & Squire cited by the report states that as the U.S.-China chip war intensifies, export restrictions are prompting China to increase its investment in domestic semiconductor research and development, and this is now evident in their rising patent applications.

On the other hand, the U.S. is also making great strides in semiconductors. The data from IP firm Mathys & Squire reveals that the hometown of chip giants Intel, Qualcomm and NVIDIA experienced a 9 percent increase in patent filings, reaching 21,269 in 2023-24.

With government policies channeling funds into domestic chip production—TSMC’s Arizona plant being a notable example—the U.S. is eager to strengthen its supply chain while intensifying its research and development initiatives, which is in line with the trend, the report suggests.

Nevertheless, China is still years behind the most cutting-edge chip technologies, the report points out. For instance, the report notes that the CPU released by Chinese chip firm Loongson last week, 3B6600, though claiming to rival 7nm x86 processors, would be similar to match the performance of AMD and Intel’s products from five years ago.

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• [News] Xiaomi Rumored to Have Taped out its First 3nm Chipset, Which Might be Launched Next Year
• [News] SMIC Reportedly to Manufacture 5nm Chips for Huawei Without EUV Machinery