By Karen Freifeld and Fanny Potkin
(Reuters) – Taiwan Semiconductor Manufacturing Company has halted shipments to China-based chip designer Sophgo after a chip it produced was discovered on a Huawei AI processor, according to two sources familiar with the situation.
Sophgo had ordered chips from TSMC that matched the one found on Huawei’s Ascend 910B, the sources said. Due to national security concerns, Huawei is prohibited from purchasing certain technologies. Reuters was unable to ascertain how the chip ended up on the Huawei product.
Sophgo stated on its website Sunday that it is fully compliant with all laws and has never conducted any business with Huawei. The company, which is linked to cryptocurrency mining equipment firm Bitmain, claimed to have provided TSMC with a detailed investigation report to demonstrate its lack of connection to Huawei.
TSMC declined to comment on the matter, while Huawei did not immediately respond to requests for comment. The U.S. Department of Commerce acknowledged reports of potential violations of U.S. export controls but refrained from commenting on any ongoing investigations.
Tech research firm TechInsights identified the TSMC chip on Huawei’s Ascend 910B during an analysis of the multi-chip processor, as per another source who spoke to Reuters on Tuesday. TSMC informed the U.S. about the discovery approximately two weeks ago after being alerted to the situation.
At the same time, TSMC suspended shipments to a client, as reported by Reuters on Wednesday, citing a Taiwan official who revealed that the suspension was prompted by the discovery of a TSMC-supplied chip in a Huawei product.
TSMC notified authorities in Taiwan and the U.S. and initiated a thorough investigation, according to the official. However, the client was not named by the official, although the latest information points to Sophgo. The tech news outlet Information also reported the same name on Saturday.
Earlier this week, TSMC, the world’s largest contract chipmaker, confirmed that it had ceased supplying Huawei since mid-September 2020 and had proactively communicated with the Commerce Department regarding the issue.
“We are not aware of TSMC being under investigation at this time,” the company’s statement read.
Huawei, based in Shenzhen, stated on Tuesday that it has not received any chips from TSMC since the U.S. implemented new export regulations on the company in 2020.
In 2020, the U.S. expanded its authority to block shipments of foreign-made items to Huawei that are directly derived from U.S. technology or software, including TSMC’s chips.
Prior to these restrictions, TSMC supplied chips for Huawei’s Ascend series, sources previously disclosed to Reuters this year. The Ascend 910B, launched in 2022, is considered the most advanced AI chip available from a Chinese company.
In August, the Research Institute for Democracy, Society and Emergency Technology (DSET) in Taiwan reported that Bitmain, which it described as a prominent Chinese integrated circuit design firm and supplier of cryptocurrency mining machines, was seeking to challenge the AI chip market dominance of Nvidia and AMD.
The DSET report identified Sophgo as a Bitmain affiliate.
Sophgo was co-founded by Micree Zhan, who is also a co-founder of Bitmain, according to corporate registration records.
In 2023, the company corresponded with the U.S. Federal Communications Commission using a Bitmain email address and operating under the name Xiamen Sophgo Technologies Ltd.
In 2021, prosecutors in Taiwan raided Bitmain’s operations and accused two Bitmain affiliates of unlawfully recruiting Taiwanese semiconductor engineers and engaging in unauthorized research and development activities, according to a statement from the New Taipei prosecutors office.
Four Taiwanese defendants pleaded guilty and were fined, as per the statement.
The Sophgo website indicates that the company has research and development centers in over 10 cities across China and other countries.