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

SAN FRANCISCO - A bipartisan pair of U.S. senators on Monday urged President Donald Trump's administration to tighten rules on chip contract manufacturers such as Taiwan Semiconductor Manufacturing Co to prevent them from making advanced AI chips for overseas subsidiaries of Chinese companies.

This comes after the Trump administration last week moved to halt a potential loophole that may have led companies to export advanced chips such as those made by Nvidia to subsidiaries of Chinese companies located outside China. That potential loophole arose last year when the Trump administration announced it would not enforce rules put in place by the previous Biden administration governing global access to U.S. chips.

The Bureau of Industry and Security (BIS), the arm of the U.S. Commerce Department that oversees export control laws, has clarified that sales to Chinese company subsidiaries in third countries such as Malaysia require a license.

But experts such as former State Department official Chris McGuire said last week that the guidance still did not address another potential loophole, under which front companies for Chinese firms could order custom chips to be made by chip contract manufacturers such as TSMC.

On Monday, Sen. Jim Banks, an Indiana Republican, and Sen. Andy Kim, a New Jersey Democrat, sent a letter to BIS chief Jeffrey Kessler asking the BIS to directly address the issue of subsidiaries of Chinese firms ordering custom chips.

"Should this gap remain unaddressed, it would substantially undermine every other restriction the United States has imposed on the (China's) access to advanced computing capability," the senators wrote. "Export controls that can be circumvented through fabrication orders placed at the world's most advanced foundry offer no meaningful protection to American national security or to the competitiveness of United States industry."

The BIS and TSMC did not immediately respond to a request for comment.

(Reporting by Stephen Nellis in San Francisco; Editing by Himani Sarkar)

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published June 8, 2026 at 9:14 PM.