Chinese AI Company Designs Downgrade Chips To Avoid US Sanctions

Illustration of graphics chips. (photo: x @yogiliman)

JAKARTA - Several Chinese AI chip companies are now designing less sophisticated processors to maintain access to Taiwan Semiconductor Manufacturing Co (TSMC) production amid US sanctions. This was revealed by four sources familiar with the matter.

The US continues to strive to hinder breakthroughs in artificial intelligence and supercomputation by the Chinese military. Washington has imposed a series of export controls on state-of-the-art processors from companies such as Nvidia and chip manufacturing equipment. The restrictions also prevent TSMC - which uses chipmakers from the US - as well as other overseas chipmakers from receiving orders to manufacture advanced chips.

A series of US export controls most recently imposed in October last year have revealed how limited China's production capacity is to advanced chips and how dependent China's AI chip design company is on TSMC - the world's leading chip contract manufacturer.

Four sources, one of whom has direct knowledge of the matter, declined to be named because of the sensitivity of chip-related problems in China.

Two of China's leading AI chip companies, MetaX and Enflame, submitted chip designs that were passed down to TSMC by the end of 2023 to comply with US restrictions, according to the two sources.

The companies previously marketed their chips as the equivalent of Nvidia's graphics processing unit (GPU). Shanghai-based MetaX has developed a product downgraded by C280, the two sources said, adding that they are running out of their most advanced GPU stock, C500, in China earlier this year.

MetaX, founded in 2020 by former Advanced Micro Devices executive, did not respond to a request for comment from Reuters. Enflate, also based in Shanghai and founded in 2018, also did not respond to a request for comment. The company is backed by tech giant Tencent and raised $2.7 billion last year.

TSMC declined to comment on individual customers, only saying that they are working with clients to ensure they comply with jurisdictions relevant to its operations.