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TSMC halted shipments to Sophgo after chip found on Huawei

AI

processor

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TechInsights discovered TSMC chip on Huawei's Ascend 910B

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US expanded authority in 2020 to stop foreign-produced

items to

Huawei

(This story was updated on Oct 27 to add Sophgo comment in

paragraph 3)

By Karen Freifeld and Fanny Potkin

Oct 26 (Reuters) - Taiwan Semiconductor Manufacturing

Company ( TSM ) suspended shipments to China-based chip

designer Sophgo after a chip it made was found on a Huawei AI

processor, according to two people familiar with the matter.

Sophgo had ordered chips from TSMC that matched the one

found on Huawei's Ascend 910B, the people said. Huawei is

restricted from buying the technology to protect U.S. national

security. Reuters could not determine how the chip ended up on

the Huawei product.

Sophgo said in a statement on its website on Sunday that

it was in compliance with all laws and had never engaged in any

business relationship with Huawei. Sophgo, which is affiliated

with cryptocurrency mining equipment company Bitmain, said it

had provided a detailed investigation report to TSMC to prove

that it was not related to Huawei.

TSMC declined to comment. Huawei did not immediately respond

to a request for comment. The U.S. Department of Commerce said

it was aware of reports of potential violations of U.S. export

controls but it could not comment on whether any investigation

was ongoing.

Tech research firm TechInsights discovered the TSMC chip on

Huawei's Ascend 910B when it took apart the multi-chip

processor, a different source told Reuters on Tuesday. Alerted

to the finding, about two weeks ago TSMC notified the U.S., the

source said.

About the same time, TSMC also halted shipments to a client,

Reuters reported on Wednesday, citing a Taiwan official who said

the suspension came after the company discovered a chip it

supplied to the client ended up in a Huawei product.

TSMC alerted Taiwan and U.S. authorities, and began a

detailed investigation, the official said. But the official did

not name the client, which the latest sources identified as

Sophgo. The Information tech news outlet also reported the name

on Saturday.

TSMC, the world's largest contract chipmaker, said earlier

this week it had not supplied Huawei since mid-September 2020,

and that it "proactively communicated" with the Commerce

Department regarding the matter.

"We are not aware of TSMC being the subject of any

investigation at this time," the company statement said.

Shenzhen-based Huawei said in a statement on Tuesday it has

not produced any chips via TSMC after the U.S. imposed new

export rules on the company in 2020.

In 2020, the U.S. expanded its authority to stop shipments

of foreign-produced items to Huawei that are the direct product

of U.S. technology or software, including TSMC's chips.

Before then, TSMC supplied chips for Huawei's Ascend series,

sources told Reuters earlier this year. Its Ascend 910B,

released in 2022, is viewed as 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 leading Chinese integrated circuit

design enterprise and supplier of cryptocurrency mining

machines, was "aiming to challenge the AI chip market dominance

of Nvidia ( NVDA ) and AMD."

The 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.

The company also communicated with the U.S. 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 by

the New Taipei prosecutors office.

Four Taiwanese defendants pleaded guilty and were given

fines, according to the statement.

Sophgo's website says it has research and development

centers in more than 10 cities in China and other countries.