When Joe Biden was about to leave the office in early 2025, he signed a law that required chipmakers to determine their end customers in a bid to prevent contract manufacturers from unknowingly fabricating chips using American technologies for companies that served as intermediaries for restricted organizations tied to the Communist Party or the People Liberation Army. The regulation was introduced after it was discovered that chips made by TSMC for China-based Sophgo were actually Huawei's Ascend 910B AI accelerators. However, the Trump administration announced in May 2025 that it would not enforce this semiconductor regulation known as the 'Foundry Due Diligence Rule,' which naturally created uncertainty about whether the foundry-focused requirements would be actively implemented at all.
"The announcement created ambiguity as to whether front-end fabricators like TSMC can export unpackaged advanced dies to non-approved designers located outside of China, without performing the due diligence specified in the Foundry Due Diligence Interim Final Rule (IFR)," the letter reads. "These exports enabled Huawei to obtain millions of controlled Ascend logic dies from TSMC, using its front company, Sophgo in 2023 and 2024."
Before the adoption of the 'Foundry Due Diligence Rule,' Chinese companies and/or their intermediaries could misrepresent chip specifications and end users when placing orders with TSMC or other foundries, which allowed restricted devices to be made despite U.S. export controls. Under the rule, foundries and OSAT providers exporting chips produced on 14/16nm-class process technologies or more advanced nodes must presume those devices qualify as controlled AI processors subject to a global licensing requirement, unless they meet an exemption. According to the letter, foundries have generally complied with these requirements since the rule took effect. As a result, Moolenaar essentially asks the government to enforce the existing controls rather than introduce stricter export controls.
Moolenaar believes that the Commerce Department's Bureau of Industry and Security could clarify its current stance on the Foundry Due Diligence Rule in two ways:
After $2.5 billion Supermicro smuggling bust, Nvidia CEO urges company to fix export control compliance
US closes loophole that allowed Chinese-owned subsidiaries located outside China to buy AI chips
Republican lawmakers urge federal agency to block imports of infringing TSMC chips as patent ruling nears
By issuing guidance, which confirms that the worldwide Regional Stability (RS) licensing requirement still applies to exports from front-end foundries;
By formally annulling the AI Diffusion IFR and amending §744.23 to explicitly restore that requirement for both foundries and OSAT providers.
Either approach would eliminate conflicting interpretations and reinforce enforcement of existing export controls, Moolenaar believes.
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Reference reading
- https://www.tomshardware.com/tech-industry/semiconductors/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/semiconductors/u-s-lawmaker-wants-govt-to-enforce-regulation-to-ensure-chipmakers-conduct-adequate-due-diligence-on-their-customers-house-member-calls-for-biden-era-export-control-to-be-enforced#main
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