The company is understood to be particularly wary of being targeted as unreliable or uncooperative as Donald Trump is set to become the next US president.

This year, Trump accused Taiwan of “stealing” the US chip industry, and suggested TSMC could move its production back home after pocketing billions of dollars in subsidies from Washington for building fabrication plants in the US.

A person close to TSMC said its move was “not a show for Trump but definitely designed to underscore that we are the good guys and not acting against US interests.”

Being cut off from TSMC could hurt Chinese tech giants that have bet on making their most advanced AI chips in Taiwan. Search giant Baidu, in particular, is aiming to build a full stack of software and hardware to underpin its AI business.

Near the center of those efforts is its Kunlun series of AI chips. Its Kunlun II processor is made by TSMC on its 7-nanometer level of miniaturization, according to Bernstein Research.

“Kunlun chips are now especially well-suited for large model inference and will eventually be suitable for training,” Baidu founder Robin Li told a conference last year. Li added that the group had been effective in cutting costs by designing its own chips.

The people briefed on the situation said TSMC’s new rules were clear in targeting AI processors, but it was so far unclear how widely that would be applied to other chips. China has a number of leading start-ups designing AI chips for self-driving, including Hong Kong-listed Horizon Robotics and Black Sesame International Holding.

Executives and company materials at both groups have indicated their newest generation of chips would be made by TSMC on the 7-nanometer node.

The people close to TSMC said its new restrictions would not have a major impact on its revenue. TSMC’s October revenue increased 29.2 percent to NT$314 billion ($9.8 billion), a slight deceleration of growth compared with preceding months.

In a statement, TSMC said it was a “law-abiding company and we are committed to complying with all applicable rules and regulations, including applicable export controls.”

The news was first reported by Chinese media site ijiwei.com.

Nian Liu contributed reporting from Beijing.

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