US lawmakers eye loopholes benefiting Chinese chip firms

A bipartisan pair of US senators on Monday urged the Trump administration to tighten rules on contract chip manufacturers such as Taiwan Semiconductor Manufacturing Co (TSMC) to prevent advanced AI chips from being made for overseas subsidiaries of Chinese companies.

The call follows a move last week by the Commerce Department’s Bureau of Industry and Security (BIS) to clarify that sales to third-country subsidiaries of Chinese firms—such as those in Malaysia—require export licenses, an attempt to close a potential workaround for curbs on high-end processors like those made by Nvidia.

Experts have warned the guidance still leaves room for front companies to place custom fabrication orders at leading foundries, potentially undermining US controls. In a letter to BIS chief Jeffrey Kessler, Sens. Jim Banks (R-Ind.) and Andy Kim (D-N.J.) asked the agency to directly address that risk, arguing that unpoliced fabrication routes could erode national security and US industry competitiveness.

BIS and TSMC did not immediately respond to requests for comment. The push highlights intensifying scrutiny of global semiconductor supply chains as Washington seeks to restrict China’s access to cutting-edge computing capabilities while policing complex transnational procurement routes.