Chinese company Moore Threads, which makes AI accelerators and graphics processors, is laying off employees after the US placed the three-year-old company on a trade blacklist last month.

Moore Threads Intelligent Technology Beijing Co. intends to lay off a small percentage of its about 1,000 workers, according to a person with knowledge of the proposal who wished to remain anonymous while speaking about a private topic. Chief Executive Officer Zhang Jianzhong explained that the choice to make the change was difficult but important in a letter to colleagues that Bloomberg News found.

Following ChatGPT, Chinese companies—from Baidu Inc. to up-and-coming players like Baichuan—are devoting a significant portion of their resources to building big language models, which call for training on expensive GPUs or graphics processing units. However, the US put export restrictions on the greatest AI processors made by Nvidia Corp. a year ago, and this year it tightened those restrictions even more, drawing attention to domestic alternatives created by Moore Threads and Shanghai Biren Technology Co.

Nothing, according to Zhang, would weaken their resolve to create the greatest all-purpose GPU in China, and they intend to see this project through to the very end.

The upcoming layoffs indicate that the Beijing startup is preparing for the effects of the US blockade, which may prevent the Chinese company from obtaining the hardware and software necessary to produce its goods.

Last month, Moore Threads and Biren were included on Washington's "entity list," which forbids the selling of US technology without a specific authorization. Zhang stated in the letter that China's GPU and AI chip industries were "severely harmed" by the increased US trade restrictions that were announced on October 17.