China’s ByteDance is working with U.S. chip designer Broadcom on developing an advanced AI processor, two sources familiar with the matter said, a move that would help TikTok’s owner secure sufficient supply of high-end chips amid U.S.-Sino tensions.

The 5 nanometre chip — a customised product known as an application-specific integrated chip (ASIC) — would be compliant with U.S. export restrictions and manufacturing work would be outsourced to Taiwan’s TSMC, the sources added.

There have been no publicly announced chip development collaborations between Chinese and U.S. companies involving 5nm or more advanced technology since Washington introduced export controls for cutting-edge semiconductors in 2022. U.S.-China deals in the sector generally concern much less sophisticated tech.

ByteDance’s tie-up with Broadcom, an existing business partner, would help slash procurement costs and ensure a stable supply of higher-end chips, said the sources, who declined to be identified due to the sensitivity of semiconductor issues in China.

TSMC is, however, not expected to start manufacturing the new chip this year, they said. One of them said while design work is well underway, the “tapeout” — which marks the end of the design phase and the beginning of manufacturing — has not started.

ByteDance and Broadcom did not respond to repeated requests for comment. TSMC declined to comment.

Like many global tech firms, ByteDance has launched a major push in generative artificial intelligence but the company and its Chinese peers have to contend with far more limited supply of AI chips than their overseas counterparts.

Nvidia’s most advanced chipsets are out of reach due to U.S. export controls aimed at impeding breakthroughs in AI and supercomputing by China’s military. Competition for U.S. chips developed specifically for the Chinese market as well as those from rival Huawei, one of the few Chinese makers of AI accelerators, is fierce.

ByteDance and Broadcom have been business partners since at least 2022. The Chinese firm has purchased the U.S. company’s Tomahawk 5nm high-performance switch chip as well as its Bailly switch for AI computer clusters, Broadcom has said in public statements.

Securing AI chips is crucial for ByteDance to make its algorithms more powerful. In addition to TikTok and the Chinese version of the short-video app called Douyin, ByteDance operates a range of popular apps including a ChatGPT-like chatbot service called Doubao, which has 26 million users.

To support its AI push, ByteDance has stockpiled Nvidia chips, according to a separate person who was briefed on the matter.

This includes A100 and H100 chips available before the first round of U.S. sanctions kicked in as well as A800 and H800 chips that Nvidia made for the China market but were also later restricted, the person said, adding that ByteDance allocated $2 billion for purchases of Nvidia chips last year.

ByteDance also purchased Huawei’s Ascend 910B chips last year, two separate sources with knowledge of the matter said.

Bytedance currently has hundreds of semiconductor-related job openings posted, including 15 for ASIC chip designers, according to checks of its website.

It has also been poaching top people from other Chinese AI chip firms, according to one of the sources who has direct knowledge of this issue.

—Eduardo Baptista, Reuters