Mystery surrounds TSMC Tech’s discovery inside Huawei AI chips

Basic circuits produced by Taiwan Semiconductor Manufacturing Co. were found in Huawei Ascend 910B chips, according to people familiar with the matter and TechInsights, a Canada-based research firm that conducts teardowns of products that have hit Washington’s radar before.

Huawei’s AI chip is one of China’s leading alternatives to Nvidia’s high-end offerings, which remain off limits to Chinese buyers. Some of the technology comes from TSMC, the world’s largest contract chipmaker, whose market capitalization of about $1 trillion dwarfs that of Tesla and Walmart.

The episode underscores the tall task of stifling China’s technology supply chain despite US export controls and sanctions. Huawei, which has been buoyed by billions of dollars in state aid in recent years, has emerged as one of China’s national technology champions and is at the forefront of the country’s AI ambitions.

Central to the Biden administration’s strategy is impeding China’s efforts in artificial intelligence, which have national security implications because of potential military applications. The Commerce Department’s Bureau of Industry and Security said it remains committed to “ensuring compliance” for export controls related to China with advanced chips and noted that it is aware of recent reports of potential violations.

The TSMC circuit in question is supposed to be inaccessible to Huawei, which has been facing US sanctions since September 2020 over national security concerns.

Based on a preliminary internal investigation, TSMC believes its technology was somehow routed through Sophgo, a Chinese chip company, although others may be involved, according to people familiar with the matter. A less likely scenario discussed internally involves TSMC circuits – or “dies” in chip industry parlance – that were removed from a stockpile Huawei gathered before US sanctions hit more than four years ago, have said the people.

What Sophgo bought from TSMC was not previously reported. A TSMC spokesman said it would take prompt action, including investigations, should any concerns arise and liaise with US officials.

TechInsights is a chip industry research firm founded in 1989. On its website, the firm says its semiconductor reverse engineering, teardowns and market analysis has an audience of more than 650 companies and 100,000 users.

Two TechInsights reports, published last month, established a link between TSMC circuits and the Huawei AI chip.

Orders to Sophgo were reported internally to TSMC last month, according to people familiar with the matter. The Taiwanese chipmaker also recently canceled Sophgo orders deemed suspicious and reported the case to U.S. regulators, the people said.

After The Wall Street Journal asked for comment last month, Sophgo denied any business ties to Huawei in a statement posted on the company’s social media account. The Chinese company added that it had shared a detailed investigation report with TSMC to prove it was not involved. Reached on Tuesday, the company referred to its earlier statement.

The TSMC circuits originally bought by Sophgo may have been dumped on gray markets, industry officials say, which some chip buyers do when they end up with excess inventory.

Huawei has said it has not produced any chips through TSMC since it was sanctioned by the US. The Ascend 910B is among Huawei’s flagship AI-related chips designed for high-performance computing and AI-intensive applications.

A separate TechInsights teardown last year on another Huawei chip prompted a Commerce Department review. Echoing the report’s findings, Commerce Secretary Gina Raimondo said US export controls had managed to limit the performance of Huawei’s chip, making it “not nearly as good” as cutting-edge alternatives.

Write to Yang Jie at [email protected] and Joyu Wang at [email protected]