TSMC is not commenting on reports that it has been ordered by the U.S. Department of Commerce to end sales of AI chips to China, calling them "market rumors." TaiwanPlus spoke with Barath Harithas, an expert at the Center for Strategic and International Studies, about what this means for TSMC and U.S. tech strategy.
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00:00TSMC has reportedly been ordered by the U.S. Department of Commerce to stop all sales and
00:06shipments of advanced AI chips to China as of Monday.
00:09The Taiwanese chip giant says they will not comment on what they call market rumors.
00:15Chris Goran has been following these stories from Taipei and is live for us now.
00:19Chris, what do we know about this order?
00:22Well, as you said, TSMC is responding to reports over the weekend that it will quite suddenly
00:28stop selling all 7-nanometer chips to China, and those are the chips that are used to train
00:34advanced AI models.
00:36And it was only Sunday where we learned that this decision may not have been made by TSMC
00:40alone, but may have actually come from an order from the U.S. Department of Commerce.
00:45And that's the part of the U.S. government that enforces export controls that are aimed
00:49at limiting China's advancement in technologies like AI.
00:53Now, I reached out to TSMC for a comment, and they sent me a brief statement which states
00:59that TSMC does not comment on market rumors.
01:02TSMC is a law-abiding company, and we are committed to complying with all applicable
01:07rules and regulations, including applicable export controls.
01:11So TSMC may not be acknowledging how they are complying with these export controls,
01:17but these export controls have been in place since October 2022.
01:21Most specific actions against other Chinese companies like Huawei go back even to the
01:25first Trump administration in 2019.
01:28Now, what is interesting about these reports is the timing.
01:34Just a few weeks ago, it was publicly known that TSMC chips that were supposed to be part
01:40of these export controls had been found in Huawei products.
01:44And of course, Donald Trump has just been re-elected in the U.S. presidential election,
01:50and his campaigns, both then and now, have put a real strong emphasis on restrictive
01:55trade policies, including tariffs, not to mention the actions that he had taken against
02:01Huawei back in 2019.
02:03Now, to learn more about how these export controls have been part of Washington's greater
02:09strategy, I spoke to Bharat Harithas at the Center for Strategic and International Studies
02:15in Washington, D.C.
02:17And I began by asking him, does he think that these export controls will continue to
02:23be part of U.S. tech strategy, regardless of who is in the White House?
02:28I think so.
02:29I think if you were to look back in history, I mean, and try to understand the sort of
02:34some pathological drivers of the U.S. national security psyche, even post-World War II, whenever
02:39there has been a pacing threat, a strategic or peer competitor, out comes out the economy
02:44containment textbook.
02:45They did it with the Soviet Union, they did it with Japan.
02:48So I think this is entirely a continuation of certain American tendencies, especially
02:53when it comes to maintaining technological leadership.
02:56And the reason for that is America has in many ways always squared off against a quantitatively
03:00larger adversary, first Soviet Union and China, and technology has always been that force
03:06multiplier that helps to deal with that strategic asymmetry.
03:09So I can understand certain acute sort of reasons for why U.S. feels it needs to secure
03:15the technological leadership, but I think that genie is not going back in the bottle
03:18anytime soon.
03:19Well, what about TSMC themselves?
03:22They're a private company.
03:23Is this going to hurt their bottom line?
03:25So based on quarterly earning reports from TSMC, their Chinese exposure has been anywhere
03:29from 12 to 16 percent.
03:31Of course, we don't see the sort of subcategory breakdown of how much of those advance ships
03:34are not.
03:35For TSMC, on the other hand, I think the impact of export controls will be upset by the increased
03:40sales because of the AI revolution.
03:42Now there's a huge demand for advanced ships from TSMC.
03:45Obviously, there will be some pain as a business, you want to sell as many ships as possible.
03:49So any loss is one loss too many.
03:52But then will this loss be fatal in any way or severely undermine their bottom line and
03:57ability to stay competitive?
03:58I think not for TSMC.
04:03Now as you heard from Bharat there, TSMC may take a small hit.
04:07But it seems like everyone involved here, whether that's TSMC, China or the United States,
04:13is getting used to the idea of an economic environment where export controls are a centerpiece
04:18of the U.S. grand strategy, won't be going away anytime soon.