US Targets Huawei Ties in TSMC AI Chip Scandal Sparking Fresh Tech Showdown

The US is preparing to blacklist Sophgo for its involvement in supplying TSMC chips found in Huawei’s AI processors. This decision intensifies Washington’s campaign against China’s tech ambitions and raises new challenges for global chipmakers.

US Blacklist Targets Huawei’s AI Chip Ties

According to an individual familiar with the situation, the Biden administration intends to impose a blacklist on a Chinese firm whose chips were unlawfully integrated into an AI processor manufactured by Huawei.

After a chip it had ordered from Taiwan Semiconductor Manufacturing startup matched one found on Huawei's Ascend 910B multi-chip system, the Chinese startup Sophgo gained attention.

Sophgo’s Role in Huawei’s Advanced Chip Development

As a result of its assistance to Huawei, Sophgo is the most recent Chinese company that the United States plans to penalize. This month, several companies that are believed to be affiliated with Huawei's shadow network were added to the prohibited trade list by the U.S. Commerce Department.

An affiliate of Bitmain, a bitcoin mining equipment supplier, Sophgo, is reportedly being added to the Entity List.

Businesses are included on the blacklist when their actions threaten American interests abroad or undermine national security. After that, exporters can't provide them technology or goods unless they get a license, which they probably won't get.

Huawei’s Long-Standing Battle with US Restrictions

One Chinese tech company that made the cut in 2019 was Huawei, which makes telecoms equipment. Unlicensed shipment of any chips, even those manufactured in other countries, to the corporation has been illegal since 2020.

Attempts to reach Sophgo for comment were met with a delay. The company had previously stated in October that it "has never been engaged in any direct or indirect business relationship with Huawei."

According to tenders examined by Reuters, Sophgo supplies local governments and state-owned enterprises like China Telecom.

AI Chips and Surveillance Tools in Focus

The tender analysis revealed that Chinese state-run colleges have purchased AI chips from Sophgo and Bitmain in the last two years for the purpose of developing AI tools, while police stations have sought to enhance their surveillance capabilities.

In October, Reuters claimed that tech research firm TechInsights dissected the Huawei 910B and found the TSMC chip. They then alerted the chipmaker, who in turn told the U.S. Commerce Department. So far as we know, TSMC halted shipments to Sophgo after realizing the chip was an exact match for their design.

TSMC’s Compliance with US Export Rules

The biggest contract chipmaker in the world, TSMC, said in October that it had stopped supplying Huawei since 2020.

In that month, a Taiwanese official indicated that TSMC had notified both the Taiwanese and American authorities and had initiated a thorough investigation. Concerning Friday's news of the investigation's findings, a TSMC representative declined to comment.

US Restrictions Halt Advanced AI Chip Exports

Reuters has learned exclusively that the United States has instructed TSMC to stop sending semiconductors using a seven-nanometer or larger manufacturing process to China beginning on November 11. These chips could find usage in artificial intelligence applications.

In October, Huawei announced that, since the United States put new export regulations on the corporation in 2020, it has not manufactured any chips through TSMC. A remark request made on Friday went unanswered right away.

Huawei Remains at the Center of China’s AI Ambitions

With a shift in focus, Huawei is once again at the forefront of China's artificial intelligence chip aspirations, after being hindered by US prohibitions.

Many consider the Ascend 910B, which debuted in 2022, to be the pinnacle of Chinese artificial intelligence chips. Last month, Yahoo Finance reported that Huawei will begin mass-producing its Ascend 910C chip, which is aimed at competing with Nvidia, a U.S. artificial intelligence chipmaker, in early 2025.

Sophgo’s Ties to Bitmain and Global Implications

An entry in the business registry lists Micree Zhan as a co-founder of both Sophgo and Bitmain.

Reuters consulted Wirescreen, a business-intelligence tool, and corporate records, which showed that Zhan still owned 23% of Xiamen Sophgo Technologies Ltd and five of its subsidiaries through an investment vehicle called Beihaishan Beside Investment Partnership.

In 2023, Sophgo used an email address associated with Bitmain to interact with the US Federal Communications Commission.

On October 28th, Bitmain stated on social media that it "is not involved in or otherwise related to the supply chain investigation."

With its Antminer brand, Bitmain boasts that it has customers in more than 100 countries and is the top producer of digital currency mining servers in the world, according to its website.