U.S. Lawmakers Urge Strict Controls on TSMC Over Chinese Subsidiary Custom Chip Orders

A bipartisan coalition of U.S. senators has formally requested that President Donald Trump's administration enforce more stringent regulations on global chip contract manufacturers, specifically naming Taiwan Semiconductor Manufacturing Co (TSMC). The legislative push aims to block these manufacturers from fabricating sophisticated artificial intelligence semiconductors for the international subsidiaries of Chinese firms.

This legislative intervention follows recent executive actions by the Trump administration intended to close a regulatory gap that potentially allowed domestic technology firms, including Nvidia, to export high-performance processors to overseas affiliates of Chinese corporations. The vulnerability in export controls emerged after the current administration decided not to enforce certain restrictive global chip access guidelines previously established under the Biden administration. In response to these concerns, the Bureau of Industry and Security (BIS), the division within the United States Department of Commerce responsible for managing export regulations, issued a clarification stating that chip sales destined for Chinese corporate subsidiaries operating in third-party nations, such as Malaysia, explicitly necessitate a government license.

Despite these regulatory adjustments, trade and national security experts, including former State Department official Chris McGuire, warned that a critical loophole persists. Under the current framework, proxy entities acting on behalf of Chinese corporations could circumvent restrictions by directly commissioning customized semiconductor designs through major independent foundries like TSMC. To address this structural vulnerability, Republican Senator Jim Banks of Indiana and Democratic Senator Andy Kim of New Jersey dispatched a joint letter to BIS Chief Jeffrey Kessler. The correspondence explicitly urges the regulatory agency to implement direct measures to neutralize the ability of foreign subsidiaries and front companies to secure specialized chip production.