The suit alleges that the world's largest contract manufacturer of chips -- used in everything from Apple iPhones to Nvidia's AI hardware -- unfairly favors Asian staff in terms of hiring, firing and working standards.

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.

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.

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.