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China Responds to U.S. ‘Order’ to Taiwan To Stop Chip Exports to the China Mainland

The U.S. Department of Commerce sent a letter last week to Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chip maker, imposing export restrictions on certain sophisticated chips, of 7 nanometer or more advanced designs, destined for mainland China, that power AI accelerator and graphics processing units. Reuters reported the letter on Sunday. The “order” will take effect on Monday, the report said.

Global Times notes that, “In recent years, the U.S. has relentlessly tightened restrictions on AI chip exports to China. However, businesses are driven by profit, and while TSMC may not be able to resist U.S. pressure, it will undoubtedly seek ways to preserve some flexibility and room for negotiation.”

Citing an insider from TSMC, Taiwan local newspaper Economic Daily News reported on Nov. 8 that, “the company is currently discussing how to respond to the new U.S. regulations.” The report also quoted an anonymous industry source as saying that it is unlikely TSMC will suspend shipments of the relevant products at this time. They add that TSMC hopes that the restrictions will only apply to mainland companies with products related to AI chips, without affecting other customers, such as those in the mobile chip sector, the local media reported.

Global Times reports, “While Washington pressures its so-called allies to decouple from China, the reality is that there has been considerable resistance. Peter Wennink, the former CEO of ASML, the world’s leading lithography manufacturer based in The Netherlands, clearly stated in a media interview that China accounts for 30% of its orders. Despite export restrictions, ASML will not abandon the market and will do everything possible to continue selling lithography machines to China, Sing Tao Daily reported in 2023.”

Global Times notes that, as usual, China has responded to the U.S. economic warfare by dramatic increases in domestic production. “China has steadily increased domestic production of semiconductors. In 2013, the ratio of domestic production to imports was 32.58%, but by the first half of 2024, this figure had risen to nearly 80%, highlighting a continuous rise in self-sufficiency and a significant boost in domestic production levels, domestic news site stcn.com reported in August.”