US lawmakers seek tighter rules on chipmakers supplying Chinese firms' overseas units

The senators expressed concern that if this loophole remains unaddressed, it would significantly weaken existing U.S. restrictions aimed at limiting China's access to advanced computing capabilities. They argued that export controls that can be bypassed through fabrication orders placed with leading foundries offer little protection to American national security or the competitiveness of U.S. industry.

This initiative follows a recent action by the Trump administration to close a potential loophole that could have allowed companies to export advanced chips, such as those produced by Nvidia, to subsidiaries of Chinese firms located outside of China. The BIS had previously clarified that sales to Chinese company subsidiaries in third countries, like Malaysia, require a license.

However, experts like former State Department official Chris McGuire noted that the guidance did not address another potential loophole involving front companies for Chinese firms ordering custom chips from contract manufacturers like TSMC. The BIS and TSMC did not immediately respond to requests for comment.