Chinese server CPU designer Hongjun Microelectronics Technology might lay off up to half of its 300-strong workforce, reports Digitimes because it no longer has access to TSMC’s 7nm node. According to media outlets in China, such as MyDrivers and ICSmart, which cite social media posts, up to 150 employees of the Chinese chip designer could be fired. Digitimes suggests, based on insight from industry insiders, that it might be due to a lack of access to TSMC’s 7nm node.

Last month, TSMC cut off Chinese semiconductor companies involved in high-end processors from its “advanced” nodes, which covers every node ranging from 7nm to the chip manufacturer’s upcoming 2nm process. TSMC launched its 7nm node in 2018, but it’s still relevant in China because domestic fabs like SMIC don’t have the means to mass produce chips fabbed on 7nm or smaller nodes, at least according to the US government.

Founded in 2021, Hongjun Microelectronics Technology intended to design Arm-based server CPUs for cloud computing. It was led by tech veterans previously working at companies like Intel and Alibaba. By 2022, Hongjun raised over $100 million through venture capital and has since taped out its server CPU, meaning the prototype has arrived from the fab.

Although taping out would typically represent Hongjun finally cresting the hill and making it past the most challenging parts of the chip design process, TSMC’s decision to restrict the 7nm node to Chinese firms could be fatal for the chip designer. The report notes that it’s unclear whether the restriction applies to Hongjun, but if it does, the firm will have to start over and tape out its processor on a different node.

It usually costs tens, if not hundreds, of millions of dollars to get a processor to the tape-out stage. Given that Hongjun is reportedly considering laying off half of its employees, it seems likely that the $100 million the company has raised isn’t enough for another tape-out, at least not without big cuts.

It might also be true that Hongjun was destined for layoffs whether TSMC restricted the 7nm node or not since $100 million isn’t exactly a ton of money to get a company from the planning stage to a genuine launch. But Hongjun may have a future if it can manufacture its chips at TSMC; if it can’t, then it’s hard to see how this Chinese semiconductor firm can continue.

The layoffs at Hongjun seem to be the intended effect of the US government’s tactics in the technology trade war between the US and China. Just days ago, the US announced further export controls on China, preventing China from obtaining advanced semiconductor and AI technology. Chinese firms say they’re ready to weather the storm and that domestic production will keep China’s chip industry afloat, but that may not prove true for Hongjun unless it can raise more capital.