Taiwan Semiconductor Manufacturing Co. has suspended shipments to Chinese chip designer Sophgo after discovering that a chip it produced for the firm was found in a Huawei Technologies Co. AI processor, according to people familiar with the matter. The move underscores the escalating tensions in the global semiconductor industry amid stringent U.S. export controls aimed at curbing China's access to advanced technology.
Sophgo had ordered chips from TSMC that matched those found on Huawei's Ascend 910B AI processor, the people said, as reported by Reuters. Huawei has been restricted from purchasing advanced technology involving U.S. intellectual property since 2020 to protect U.S. national security interests. It remains unclear how the chip ended up in Huawei's product, and Reuters could not determine the exact pathway.
In response to the suspension, Sophgo issued a statement on its website Sunday, asserting its compliance with all applicable laws and denying any business relationship with Huawei. "We have provided a detailed investigation report to TSMC to prove that we are not related to Huawei," the company stated. Sophgo is affiliated with Bitmain Technologies Ltd., a leading cryptocurrency mining equipment manufacturer.
TSMC declined to comment on the specific suspension but noted earlier this week that it had not supplied Huawei since mid-September 2020. "We are not aware of TSMC being the subject of any investigation at this time," the company said in a statement, adding that it proactively communicates with the U.S. Department of Commerce on such matters.
The U.S. Department of Commerce acknowledged awareness of reports regarding potential violations of export controls but declined to comment on any ongoing investigations. "We take any allegations of violations seriously," a department spokesperson said.
TechInsights Inc., a technology research firm, discovered the TSMC-manufactured chip on Huawei's Ascend 910B during a teardown of the multi-chip processor, according to a source familiar with the findings. Alerted to this discovery, TSMC notified U.S. authorities approximately two weeks ago and subsequently halted shipments to the client identified as Sophgo.
This incident raises concerns about potential circumvention of U.S. export controls designed to limit Huawei's access to advanced semiconductors. In 2020, the U.S. expanded its authority to block shipments of foreign-produced items to Huawei that are direct products of U.S. technology or software, which includes chips made by TSMC.
Huawei, for its part, stated on Tuesday that it has not produced any chips via TSMC since the imposition of U.S. export rules in 2020. "We have strictly adhered to all laws and regulations," a Huawei spokesperson said. The company did not provide further details on how the TSMC chip ended up in its Ascend 910B processor, which is considered one of the most advanced AI chips available from a Chinese company.
Sophgo's alleged connection to Huawei has drawn scrutiny due to their shared affiliations. Sophgo was co-founded by Micree Zhan, who also co-founded Bitmain. The Research Institute for Democracy, Society, and Emerging Technology in Taiwan reported in August that Bitmain aims to challenge the AI chip market dominance of Nvidia Corp. and Advanced Micro Devices Inc.
In 2021, Taiwanese prosecutors raided Bitmain's operations in Taiwan, accusing two affiliates of illegally recruiting semiconductor engineers and conducting unauthorized research and development activities. Four Taiwanese defendants pleaded guilty and were fined, according to the New Taipei prosecutors office.
Sophgo maintains that it operates independently and has research and development centers in more than 10 cities across China and other countries. "We fully abide by all legal requirements and maintain no direct business links with Huawei," the company reiterated in its statement.
The suspension by TSMC highlights the challenges faced by global semiconductor companies in navigating complex international regulations and supply chain relationships. It also reflects the broader impact of U.S. export controls on China's tech industry, particularly on firms like Huawei that have been targeted for national security reasons.
Industry analysts suggest that companies like Huawei may resort to indirect methods to acquire restricted technology, such as using third parties or proxies to secure components. "Huawei's attempt to manufacture a chip through TSMC reflects a larger strategy to continue leveraging Western-designed technologies," said an industry expert familiar with the matter. "The company often conceals its chip suppliers to avoid potential conflicts with its partners."
The U.S. government has been vigilant in enforcing export controls, and any violations could have significant repercussions for companies involved. "We are committed to ensuring that sensitive U.S. technologies do not fall into the hands of entities that pose a national security risk," the Department of Commerce spokesperson added.
