- Taiwan’s TSMC pauses shipments to chip designer Sophgo following discovery of its chip in Huawei’s AI processor, intensifying scrutiny over U.S. export restrictions.
Taiwan Semiconductor Manufacturing Company (TSMC) has suspended shipments to the Chinese chip design firm Sophgo. This action follows the discovery of a TSMC-manufactured chip on Huawei’s Ascend 910B, an advanced AI processor, raising questions about potential export control violations and bringing the complex network of cross-border technology relationships into sharp focus.
This decision comes amid growing efforts by the United States to curb China’s access to high-end semiconductor technology, citing national security concerns. Sophgo, a subsidiary of cryptocurrency giant Bitmain, has denied any connection to Huawei, emphasizing its compliance with all legal requirements. However, the move by TSMC underscores how closely tech giants and regulators are monitoring the semiconductor supply chain in a climate of regulatory and political scrutiny.
The discovery that ignited the controversy emerged when tech research firm TechInsights dismantled Huawei’s Ascend 910B processor, revealing a chip produced by TSMC in the device. Sophgo had reportedly ordered chips from TSMC that matched the technical specifications of the chip discovered in Huawei’s processor, according to anonymous sources. Sophgo has since clarified that it has never engaged in business with Huawei and reiterated its compliance with international laws and export regulations.
Sophgo published a statement on its website, asserting its adherence to all applicable laws and confirming it provided TSMC with an investigative report to demonstrate that it did not conduct business with Huawei. Both TSMC and Huawei have remained mostly silent on the matter, with TSMC opting not to comment publicly and Huawei failing to respond to inquiries about the incident.
The U.S. Department of Commerce, responsible for enforcing export controls, stated that it is aware of reports suggesting potential violations of U.S. export restrictions. However, it has refrained from confirming whether it has launched an investigation into the incident. Washington’s export rules prevent companies like TSMC from selling certain types of chips to Huawei without a special license if the chips are produced using American technology or software. This regulation, implemented in 2020, effectively severed Huawei’s supply of advanced chips from TSMC, impacting the tech company’s capabilities in artificial intelligence and telecommunications.
In response to the discovery, TSMC took immediate steps to notify U.S. authorities and halted shipments to its unnamed client, now identified as Sophgo. A Taiwan government official commented on the suspension, explaining that TSMC alerted both Taiwan and the United States authorities and initiated an in-depth investigation. This preventive response reflects the cautious stance that TSMC has adopted in light of U.S. export restrictions, showing the proactive measures the company is taking to mitigate risks and avoid potential penalties.
As the world’s largest contract chipmaker, TSMC has long been a central player in the semiconductor supply chain, producing chips for a vast array of applications, from consumer electronics to high-end artificial intelligence processors. The company’s operations have placed it in a delicate position amid escalating U.S.-China trade tensions, and TSMC has taken pains to comply with U.S. export regulations to avoid compromising its market access in both countries.
In a statement released earlier this week, TSMC reiterated its commitment to U.S. export regulations, emphasizing that it has not supplied Huawei since mid-September 2020. The chipmaker said it “proactively communicated” with the U.S. Commerce Department following the discovery but stated that it was not currently the subject of any formal investigation.
Founded by Micree Zhan, who also co-founded Bitmain, Sophgo is part of a new generation of Chinese companies seeking to make inroads into the AI processor market, historically dominated by U.S. firms such as Nvidia and AMD. Bitmain itself is well known as a top producer of cryptocurrency mining hardware, with Sophgo established to pursue the AI chip market, targeting applications in data centers, machine learning, and other high-performance computing areas.
The connection between Sophgo and Huawei remains an area of interest for regulators and industry experts. A report from Taiwan’s Research Institute for Democracy, Society and Emergency Technology (DSET) described Bitmain as a significant player in China’s AI ambitions and identified Sophgo as an affiliate of Bitmain, highlighting its strategic alignment with China’s technological development goals.
The company’s legal and regulatory history further complicates the picture. In 2021, Taiwanese authorities conducted raids on Bitmain-affiliated offices in Taiwan, accusing them of illegally recruiting Taiwanese semiconductor engineers and conducting unauthorized R&D activities. This led to guilty pleas and fines for four Taiwanese employees. Such incidents illustrate the intensity of competition for semiconductor talent and underscore the geopolitical tensions surrounding technology transfer in the semiconductor industry.
Huawei’s Ascend 910B processor, released in 2022, represents a milestone in China’s efforts to achieve self-sufficiency in AI technology, a strategic goal for the nation’s tech sector. The Ascend series is Huawei’s flagship AI processor line, designed to perform complex computations needed for applications like natural language processing, image recognition, and other forms of machine learning.
Due to the lack of direct access to TSMC’s chips following U.S. sanctions, Huawei’s development of the Ascend 910B as an indigenous alternative gained significant attention, positioning it as a viable competitor to AI chips produced by Western companies. The appearance of a TSMC-manufactured component in Huawei’s latest AI processor suggests that, despite sanctions, high-end semiconductor components are still finding their way into China’s tech sector.
The discovery of TSMC chips in Huawei products has sparked concern within the industry, as companies attempt to navigate increasingly stringent U.S. export rules. For TSMC, the incident could have significant implications for its relationship with U.S. authorities, potentially impacting its future supply agreements and regulatory obligations.
The halt in shipments to Sophgo demonstrates TSMC’s cautious approach to complying with U.S. regulations. Nevertheless, this suspension could have ripple effects, especially if similar discoveries emerge involving other companies or technologies. Taiwan’s role as a critical player in the semiconductor industry, coupled with its strong economic ties to both China and the United States, places it at the center of an increasingly fraught technology landscape.
Industry analysts are closely watching how this situation will impact TSMC’s business and whether U.S. authorities will tighten export restrictions further. The company’s proactive stance and commitment to compliance with export controls have so far protected it from legal repercussions. However, as the lines between civilian and military technology continue to blur, companies like TSMC may face greater regulatory scrutiny in the future.
The discovery raises questions about how technology companies navigate the regulatory maze shaped by U.S.-China tensions. For Chinese firms like Sophgo, the incident underscores the challenges of developing advanced technology without access to Western suppliers. Meanwhile, U.S. regulators are under pressure to tighten controls on technology exports to China, particularly in sectors like AI, where advances could have military applications.
In August 2024, U.S. Secretary of Commerce Gina Raimondo announced that her department was exploring further restrictions on technology exports to China, focusing on advanced computing, AI, and semiconductor technologies. The U.S. government’s overarching goal is to preserve its competitive edge in key technologies while limiting China’s access to components that could fuel its AI and defense capabilities.
For Taiwan, this regulatory landscape presents both risks and opportunities. As a major global supplier of semiconductors, Taiwan has benefitted economically from U.S. and European demand for chips. At the same time, its chip companies face intense scrutiny from Washington, as the United States seeks assurances that they will comply with export controls aimed at restricting China’s technological development.
