Lawmakers Seek Tougher Export Rules for Contract Chip Manufacturers
A bipartisan pair of US senators has called on President Donald Trump’s administration to tighten export-control rules governing semiconductor contract manufacturers such as Taiwan Semiconductor Manufacturing Co. (TSMC), arguing that stronger safeguards are needed to prevent advanced artificial intelligence chips from reaching foreign subsidiaries of Chinese companies.
The appeal follows a move by the Trump administration last week to close a potential loophole that could have enabled exports of chips, including products designed by Nvidia, to overseas units of Chinese firms.
The concern emerged after the administration announced that it would not enforce global-access restrictions on US chips that had been introduced under the previous Biden administration.
The Bureau of Industry and Security (BIS), the Commerce Department agency responsible for overseeing export controls, has clarified that transactions involving Chinese company subsidiaries operating in third countries, including Malaysia, require a government license. While that step addressed one area of concern, experts say additional vulnerabilities remain.
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Among them is the possibility that shell companies linked to Chinese businesses could commission custom-designed chips from contract manufacturers such as TSMC.
According to former State Department official Chris McGuire, existing guidance does not adequately address this route, potentially allowing advanced semiconductor capabilities to reach entities that US restrictions are intended to limit.
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In a letter sent to BIS chief Jeffrey Kessler, Republican Senator Jim Banks of Indiana and Democratic Senator Andy Kim of New Jersey urged the agency to address the issue of Chinese subsidiaries obtaining custom chips through contract manufacturing arrangements.
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The senators warned that leaving the matter unresolved could undermine US efforts to restrict China’s access to computing power. They argued that export controls lose effectiveness if companies can bypass them through fabrication orders placed with the world’s leading chip foundries, weakening protections for US national security and the competitiveness of American industry.