TSMC suspended shipments to China firm after chip found on Huawei processor, sources say

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

Sophgo h ordered chips from TSMC that matched one found on Huawei's Ascend 910B, people said. Huawei is restricted from buying techlogy to protect US national security. Reuters could t determine how chip ended up on Huawei product.

Sophgo, which is affiliated with cryptocurrency mining equipment company Bitmain, did t respond to requests for comment. TSMC declined comment. Huawei did t immediately respond to a request for comment. US Department of Commerce said it was aware of reports of potential violations of US export controls but could t comment on wher any investigation is ongoing.

Tech research firm TechInsights discovered TSMC chip on Huawei's Ascend 910B when it took apart multi-chip processor, a different source told Reuters on Tuesday. Alerted to finding, about two weeks ago TSMC tified US, source said.

About same time, TSMC also halted shipments to a client, Reuters reported on Wednesday, citing a Taiwan official who said suspension came after company discovered a chip it supplied to client ended up in a Huawei product.

TSMC alerted Taiwan and US authorities, and began a detailed investigation, official said. But official did t name client, which latest sources have identified as Sophgo. Information tech news outlet also reported name earlier on Saturday.

TSMC, world's largest contract chipmaker, said earlier this week it h t supplied Huawei since mid-September 2020, and that it "proactively communicated" with Commerce Department regarding matter. "We are t aware of TSMC being subject of any investigation at this time," company statement said.

Shenzhen-based Huawei said in a statement on Tuesday it has t produced any chips via TSMC after US imposed new export rules on company in 2020.

In 2020, US expanded its authority to stop shipments of foreign-produced items to Huawei that are direct product of US techlogy or software, including TSMC's chips. Before n, TSMC supplied chips for Huawei's Ascend series, sources told Reuters earlier this year. Its Ascend 910B, released in 2022, is viewed as most vanced AI chip available from a Chinese company.

In August, Research Institute for Democracy, Society and Emergency Techlogy (DSET) in Taiwan reported that Bitmain, which it described as a leing Chinese integrated circuit (IC) design enterprise and supplier of cryptocurrency mining machines, was "aiming to challenge AI chip market dominance of Nvidia and AMD."

DSET report described Sophgo as a Bitmain affiliate.

Sophgo was co-founded by Micree Zhan, who also co-founded Bitmain, according to a corporate registration database. company also communicated with Federal Communications Commission in 2023 using a Bitmain email dress and name Xiamen Sophgo Techlogies Ltd.

In 2021, prosecutors raided Bitmain’s operations in Taiwan and accused two Bitmain affiliates of illegally recruiting Taiwanese semiconductor engineers and illegally conducting R&D, according to a statement by New Taipei prosecutors office. Four Taiwanese defendants pleed guilty and were given fines, according to statement.

Sophgo's website says it has R&D centres in more than 10 cities in China and or countries.