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Taiwan Semiconductor Manufacturing Company has notified Chinese chip design companies that it will suspend production of their most advanced artificial intelligence chips, as Washington continues to impede Beijing’s AI ambitions.

TSMC, the world’s largest contract chipmaker, told Chinese customers it would no longer manufacture AI chips at advanced process nodes of 7 nanometres or smaller as of this coming Monday, three people familiar with the matter said.

Two of the people said any future supplies of such semiconductors by TSMC to Chinese customers would be subject to an approval process likely to involve Washington.

TSMC’s tighter rules could reset the ambitions of Chinese technology giants such as Alibaba and Baidu, which have invested heavily in designing semiconductors for their AI clouds, as well as a growing number of AI chip design start-ups that have turned to the Taiwanese group for manufacturing.

The US has barred American companies like Nvidia from shipping cutting-edge processors to China and also created an extensive export control system to stop chipmakers worldwide that are using US technology from shipping advanced AI processors to China. There have been reports that a new US rule would ban foundries from making advanced AI chips designed by Chinese firms, according to analysts at investment bank Jefferies.

TSMC is rolling out its new policy as the US Commerce Department investigates how cutting-edge chips the group made for a Chinese customer ended up in a Huawei AI device. The Chinese national tech champion is subject to multiple US sanctions and export controls.

People familiar with TSMC’s move said its decision was driven by a “combination” of the need to improve internal controls in the wake of that ongoing probe and the next wave of US export controls on chip supplies to China, expected before US President Joe Biden leaves office.

“We want to start mitigating before there are solid, structured regulations,” one of the people said.

The company is understood to be particularly wary of being targeted as unreliable or uncooperative as Donald Trump is set to become the next US president.

This year, Trump accused Taiwan of “stealing” the US chip industry, and suggested TSMC could move its production back home after pocketing billions of dollars in subsidies from Washington for building fabrication plants in the US.

A person close to TSMC said its move was “not a show for Trump but definitely designed to underscore that we are the good guys and not acting against US interests”.

Being cut off from TSMC could hurt Chinese tech giants that have bet on making their most advanced AI chips in Taiwan. Search giant Baidu, in particular, is aiming to build a full stack of software and hardware to underpin its AI business.

Near the centre of those efforts is its Kunlun series of AI chips. Its Kunlun II processor is made by TSMC on its 7-nanometre level of miniaturisation, according to Bernstein Research.

“Kunlun chips are now especially well-suited for large model inference and will eventually be suitable for training,” Baidu founder Robin Li told a conference last year. Li added that the group had been effective in cutting costs by designing its own chips.

The people briefed on the situation said TSMC’s new rules were clear in targeting AI processors, but it was so far unclear how widely that would be applied to other chips. China has a number of leading start-ups designing AI chips for self-driving, including Hong Kong-listed Horizon Robotics and Black Sesame International Holding.

Executives and company materials at both groups have indicated their newest generation of chips would be made by TSMC on the 7-nanometre node.

The people close to TSMC said its new restrictions would not have a major impact on its revenue. TSMC’s October revenue increased 29.2 per cent to NT$314bn ($9.8bn), a slight deceleration of growth compared with preceding months.

In a statement, TSMC said it was a “law-abiding company and we are committed to complying with all applicable rules and regulations, including applicable export controls”.

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Europe won’t be able to finance Ukraine’s defenses against Russia’s invasion on its own if the US withdraws support under Donald Trump’s next presidency, Hungarian Prime Minister Viktor Orban said Friday.

Orban said recent events vindicated the conclusions from his controversial July diplomatic mission to Kyiv, Moscow and Beijing and showed Ukraine was losing the war.

“The Americans are going to get out of this war,” Orban, who is hosting a European Union summit in Budapest on Friday, said on public radio. “Europe can’t finance this war on its own.”

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The European Union and China said they made some progress after a week of technical talks in Beijing aimed at scaling back or reversing tariffs that the bloc applied to electric vehicles made in China.

The EU and China have been seeking an agreement on so-called price undertakings — a complex mechanism to control prices and volumes of exports, used to avoid tariffs.

China’s invitation to negotiate in person was seen a sign of some momentum in the talks, according to people familiar with the matter.

Several rounds of talks didn’t yield a solution that meet the EU’s strict requirements, including alignment with WTO rules and compensating for the full effect of the duties. The 27-nation bloc also wants to ensure it can monitor compliance.

Negotiations will continue at a technical level next week, both sides said.

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You do not vote fascism away. Even though this feels obvious, the right-wing political establishment in the U.S. has accomplished something remarkable with the help of the Democratic Party. They managed to shift the discourse so far right that they normalized positions that were possibly once inconceivable for many liberal voters.

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Chinese President Xi Jinping told Malaysian Prime Minister Anwar Ibrahim that the two nations should strengthen strategic ties and enhance mutual political trust in efforts to support their core interests.

China’s leader said the two countries should deepen mutually beneficial cooperation and jointly promote development in digital economy, artificial intelligence, new energy and other areas, state broadcaster China Central Television reported, citing their Thursday meeting at the Great Hall of the People in Beijing.

The Malaysian leader’s trip comes as the Muslim-majority country draws closer to Beijing, with Anwar openly criticizing the US over its support of Israel. Last month, Malaysia, Indonesia, Vietnam and Thailand became partner nations to the BRICS bloc that China and Russia hope becomes a counterweight to the US-led West.

China also welcomes more high-quality Malaysian imports and is willing to deepen cooperation in other areas including higher education, culture and tourism, Xi said.

The Malaysian government is committed to enhancing its strategic ties with China, Anwar was quoted as saying in the report.

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Donald Trump’s imminent return to the White House was not the surprise it was when he won his first term, Chinese officials have said, and this time, policy strategy and contingencies have been planned well in advance.

When Trump won the 2016 US presidential election, Beijing, like the rest of world, was caught off guard because attention had focused on Democratic nominee Hillary Clinton, the country’s former top diplomat and a familiar face for Beijing.

Speaking on condition of anonymity, Chinese officials told the Post that a mix of research and preparation was under way well before election day so that Beijing would be better prepared in the event of a second Trump term.

Discussions on how to prepare for the possibility of a second Trump term began in the spring, according to an official overseeing research.

A source familiar with the situation said advisers wrote reports on how to manage such an outcome.

The person added that he believed Chinese officials were also looking into the prominent role that the world’s richest person – Elon Musk – had played, as well as his ties with China.

The Tesla and SpaceX boss gave more than US$120 million to help fund Trump’s campaign. Musk has also had extensive dealings with top Chinese leaders due to his business in China, but it is unclear what role the billionaire will play in the new administration.

Trump’s victory will not affect China’s general economic direction; it has been set with all kinds of scenarios taken into consideration, according to a contact from a central level economic-related office.

“But when Trump comes back, the US may resume its strategy of pulling back and pushing for manufacturing to return home, escalating the trade war, and this could create barriers to exporting products and affect the real economy in China,” the person added.

Another source familiar with China’s Middle East foreign policy said China may have to adjust its diplomatic strategy in view of Trump’s steadfast support for Israel and his bold moves in his first term to relocate the US embassy from Tel Aviv to Jerusalem.

The possibility of an intensified arms race is also on Beijing’s radar, according to the source.

Trump’s stance on China may not differ much from his first term but “its indirect policies – those affecting areas outside China – and their impact would be very different [when they land on China]”, a contact with a trade-related office said.

The US approach to China has seen a major shift, and Trump in 2017 listed China, along with Russia, as America’s primary threats. Under Trump, tensions between the two countries spilled over from trade to technology, and from geopolitics to ideology.

Zhu said China’s approach to US policy was already set and remained consistent. “Even with its pressure on China, Beijing continues to emphasise that both countries should still work together,” he said.

“Still, there is no way that you can sufficiently prepare for it. Now with Republicans dominating the White House and the Senate, the Congress could push agendas much further than we have seen under Biden, such as on the removal of [most-favoured nation] status and on diplomatic recognition of Taiwan.”

Neil Thomas, a fellow for Chinese politics at the Asia Society Policy Institute’s Centre for China Analysis, said: “China is better prepared for Trump this time, and [Chinese President Xi Jinping] is likely to target his preference for deal-making to press for strategic advantage in the Indo-Pacific.”

China would look to divide and rule US allies and partners by trumpeting Beijing’s support for economic globalisation and framing Washington as a disruptive force, he added.

The US and China have each built up their respective alliances over the past couple of years in economic, military and diplomatic fields.

China’s top challenge under Trump would be guiding its delicate economy through the bruising tariff war that he wanted to unleash, he said.

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The Republican president-elect has threatened to relaunch a trade war with Europe, withdraw US support for Ukraine, and roll back America’s transatlantic security commitment.

Even as European leaders scrambled to congratulate Donald Trump and offered to work with him, some of their underlings were on the brink of despair.

“It is a disaster for us, there is no good to come from this,” said an EU diplomat, whose weary eyes betrayed an all-nighter watching the election results roll in.

Officials in the Belgian capital have spent months discussing how to “Trump-proof” the EU and Nato.

On Monday, its incoming trade chief Maros Sefcovic said that regardless of who won, the bloc would “put forward an offer of cooperation” but would “be ready to stand up for our interest if faced with a disruptive scenario”.

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