TSMC says it will suspend shipments to Chinese firm after chip found on Huawei AI processor

Taiwan Semiconductor Manufacturing Company has suspended shipments to China-based chip designer Sophgo after a chip it made was found on a Huawei AI processor, two people familiar with the matter said.

Sophgo had ordered chips from TSMC that matched those on Huawei’s Ascend 910B, the people said. Huawei is not allowed to buy the technology to protect US national security. Reuters was unable to determine how the chip ended up on the Huawei product.

Sophgo said in a statement on its website on Sunday that it complied with all laws and had never had a business relationship with Huawei. Sophgo, which is affiliated with cryptocurrency mining equipment company Bitmain, said it had provided a detailed investigative report to TSMC to prove it was not linked to Huawei.

TSMC declined to comment. Huawei did not immediately respond to a request for comment. The U.S. Commerce Department said it was aware of reports of possible violations of U.S. export controls, but could not comment on whether an investigation was underway.

Technical research firm TechInsights discovered the TSMC chip on Huawei’s Ascend 910B when it took apart the multi-chip processor, another source told Reuters on Tuesday. Informed of the finding, TSMC notified the US about two weeks ago, the source said.

Around the same time, TSMC also halted shipments to a customer, Reuters reported on Wednesday, citing a Taiwanese official who said the suspension came after the company discovered that a chip it had supplied to the customer ended up in a Huawei product.

TSMC alerted Taiwan and US authorities and launched a detailed investigation, the official said. But the official did not name the client, which the latest sources said was Sophgo. The Information Tech news outlet also reported the name on Saturday.

TSMC, the world’s largest contract chipmaker, said earlier this week that it has not supplied Huawei since mid-September 2020 and that it has “proactively” communicated with the Commerce Department on the issue.

“We are not aware that TSMC is the subject of any investigation at this time,” the company statement said.

Shenzhen-based Huawei said in a statement on Tuesday that it has not produced chips through TSMC after the US imposed new export rules on the company in 2020.

In 2020, the US expanded its authority to stop shipments to Huawei of foreign-produced items that are the direct product of US technology or software, including TSMC’s chips.

Before that, TSMC supplied chips for Huawei’s Ascend series, sources told Reuters earlier this year. The Ascend 910B, released in 2022, is said to be the most advanced AI chip available from a Chinese company.

In August, the Research Institute for Democracy, Society and Emerging Technology (DSET) in Taiwan reported that Bitmain, which it described as a leading Chinese integrated circuit design company and supplier of cryptocurrency mining machines, was “aiming to dominate AI chip market. from Nvidia and AMD.”

The DSET report described Sophgo as a subsidiary of Bitmain.

Sophgo was co-founded by Micree Zhan, who also co-founded Bitmain, according to a company registration database.

The company also communicated with the US Federal Communications Commission in 2023 using a Bitmain email address and the name Xiamen Sophgo Technologies Ltd.

In 2021, prosecutors raided Bitmain’s operations in Taiwan and accused two Bitmain affiliates of illegally recruiting Taiwanese semiconductor engineers and illegally conducting research and development activities, according to a statement from the New Taipei Prosecutor’s Office.

Four Taiwanese suspects have pleaded guilty and were fined, the statement said.

Sophgo’s website states that it has research and development centers in more than ten cities in China and other countries.