Sources say that TSMC suspended shipments to the Chinese company after a chip was found in a Huawei processor

Written by: Karen Freifeld and Fanny Potkin

(Reuters) – Taiwan Semiconductor Manufacturing Corp has suspended shipments to China-based chip designer Sophgo after a chip it made in a Huawei AI processor was found, according to two people familiar with the matter.

Sources said Sophgo has ordered chips from TSMC that match the chips found in Huawei’s Ascend 910B. Huawei is restricted from purchasing the technology to protect US national security. Reuters was unable to determine how the chip ended up in the Huawei product.

Sophgo, which is affiliated with cryptocurrency mining equipment company Bitmain, did not respond to requests for comment. TSMC declined comment. Huawei did not immediately respond to a request for comment. The U.S. Commerce Department said it was aware of reports of potential violations of U.S. export controls but could not comment on whether any investigations were ongoing.

Technology research firm TechInsights discovered the TSMC chip in Huawei’s Ascend 910B when it took apart its multi-chip processor, a different source told Reuters on Tuesday. The source said TSMC reported the finding to the US about two weeks ago.

TSMC also stopped shipping to a customer, Reuters reported on Wednesday, citing a Taiwanese official who said the suspension came after the company discovered the chip it had supplied to the customer was in a Huawei product.

The official said that TSMC warned Taiwan and US authorities and launched a detailed investigation. However, the official did not name the customer, whom recent sources identified as Sophgo. The information technology news outlet also reported the name early Saturday.

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

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

Shenzhen-based Huawei said on Tuesday that it did not produce any chips through TSMC after the United States imposed new export rules on the company in 2020.

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

TSMC was previously supplying chips for Huawei’s Ascend series, sources told Reuters earlier this year. Launched in 2022, Ascend 910B is considered the most advanced AI chip offered by a Chinese company.

In August, Taiwan’s Research Institute for Democracy, Society and Emergency Technology (DSET) reported that Bitmain, which it described as China’s leading integrated circuit (IC) design organization and supplier of cryptocurrency mining machines, “aims to challenge artificial intelligence” . Nvidia and AMD’s dominance in the chip market.”

The DSET report identified Sophgo as a Bitmain subsidiary.

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

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

In 2021, prosecutors raided Bitmain’s operations in Taiwan and accused two Bitmain subsidiaries of illegally hiring Taiwanese semiconductor engineers and illegally conducting R&D, according to a statement by the New Taipei prosecutor’s office.

According to the statement, the four Taiwanese defendants pleaded guilty and were fined.

Sophgo’s website states that it has R&D centers in more than 10 cities in China and other countries.

(Reporting by Karen Freifeld in New York and Fanny Potkin in Singapore; Editing by Chris Sanders and Diane Craft)