China's Taiwan Affairs Office said on Wednesday that a U.S. order to Taiwan Semiconductor Manufacturing Co to halt shipments of advanced chips to Chinese customers undermines the interests of Taiwanese companies and raises tension across the Taiwan Strait.

Taiwan Semiconductor Manufacturing Co (TSMC) can’t produce 2nm chips outside of Tawain, according to J.W. Kuo, the country's Minister of Economic Affairs. The Arizona fab 21 is still on track to produce 4nm chips in 2025.

China's semiconductor index leapt close to a three-year high on Monday on bets a U.S. order halting Taiwan Semiconductor Manufacturing Co's shipments of advanced chips to Chinese customers could accelerate Beijing's self-reliance efforts.

A wider shipment ban on TSMC-made chips could affect a range of mainland businesses from electric vehicles to smartphones.

China’s semiconductor index surged to nearly a three-year peak on Monday, fueled by expectations that new U.S. export restrictions on Taiwan Semiconductor Manufacturing Co. (TSMC) could expedite China’s push for semiconductor self-sufficiency.

TSMC has reportedly notified Chinese customers that shipments of AI-related chips made with 7nm or below processes will be halted. Additionally, any AI chip projects initiated after November 11 must be approved by the US Department of Commerce and other relevant agencies.