TSMC Halts Shipments to Chinese Firm After Chip Found in Huawei AI Processor

Taiwan Semiconductor Manufacturing Company (TSMC) has halted shipments to the Chinese chip designer Sophgo after a TSMC-manufactured chip was identified in Huawei's AI processor, ascend 910B, raising potential concerns over U.S. export control violations. Authorities in Taiwan and the U.S. are reportedly investigating the matter.

TSMC Shipment Freeze Sparks U.S. Export Violation Concerns After Chip Found in Huawei Processor

According to two individuals familiar with the situation, Taiwan Semiconductor Manufacturing Company has halted shipments to Sophgo, a chip designer based in China, following the discovery of a chip manufactured by the company on a Huawei AI processor.

According to the sources, Sophgo had procured processors from TSMC that were identical to those found on Huawei's Ascend 910B. Huawei is prohibited from purchasing the technology to safeguard U.S. national security. Reuters could not ascertain how the device was incorporated into the Huawei product.

Sophgo, associated with the cryptocurrency mining equipment manufacturer Bitmain, did not respond to requests for comment. TSMC declined to answer. Huawei did not promptly address a request for comment. The U.S. Department of Commerce acknowledged that it was aware of allegations of potential violations of U.S. export controls; however, it could not provide an update on the status of any ongoing investigations.

On October 22, a different source informed Reuters that the TSMC chip was discovered on Huawei's Ascend 910B during the disassembly of the multi-chip processor by tech research firm TechInsights. According to the source, TSMC informed the U.S. of the discovery approximately two weeks ago.

At approximately the same time, Reuters reported on October 23 that TSMC suspended shipments to a client. The suspension resulted from the company's discovery that a semiconductor supplied to the client was included in a Huawei product. A Taiwan official was cited in the report.

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According to the official, TSMC initiated a comprehensive investigation after notifying Taiwan and U.S. authorities. However, the official did not identify the client, who has been identified as Sophgo by the most recent sources. The Information Technology News outlet also reported the name on October 26.

TSMC, the world's largest contract chipmaker, confirmed earlier this week that it had not supplied Huawei since mid-September 2020 and has "proactively communicated" with the Commerce Department.

"We are not aware of TSMC being the subject of any investigation at this time," the company statement said.

In a statement issued on October 22, Huawei, headquartered in Shenzhen, stated that it has yet to manufacture any semiconductors through TSMC since the United States implemented new export regulations on the company in 2020.

In 2020, the United States expanded its authority to halt shipments of foreign-produced items to Huawei that are the direct product of U.S. technology or software, including TSMC's processors.

Bitmain’s Affiliate Sophgo Linked to Huawei’s Ascend Chips Amid Ongoing AI Market Competition

Earlier this year, sources informed Reuters that TSMC had supplied processors for Huawei's Ascend series. The Ascend 910B, introduced in 2022, is considered the most sophisticated AI processor produced by a Chinese company.

The Research Institute for Democracy, Society and Emergency Technology (DSET) in Taiwan reported in August that Bitmain, a prominent Chinese integrated circuit (IC) design enterprise and supplier of cryptocurrency mining machines, was "attempting to challenge the AI chip market dominance of Nvidia (NVDA.O) and AMD (AMD.O)."

Sophgo was identified as a Bitmain affiliate in the DSET report.

According to a corporate registration database, Micree Zhan, who also co-founded Bitmain, was a co-founder of Sophgo.

In 2023, the corporation communicated with the Federal Communications Commission using a Bitmain email address named Xiamen Sophgo Technologies Ltd.

Prosecutors raided Bitmain's operations in Taiwan in 2021, and two Bitmain affiliates were accused of unlawfully recruiting Taiwanese semiconductor engineers and conducting R&D, according to a statement from the New Taipei prosecutors' office.

According to the statement, four Taiwanese defendants entered guilty pleas and were penalized.

According to Sophgo's website, the company maintains research and development facilities in over ten locations throughout China and other countries.