Mystery surrounds discovery of TSMC Tech inside Huawei AI chips

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

The Huawei AI chip is one of China’s top homegrown alternatives to Nvidia’s high-end offerings that remain off-limits to buyers in China. Some of the technology originates from TSMC, the world’s largest contract-chip manufacturer, whose market capitalization of roughly $1 trillion exceeds that of Tesla and Walmart.

The episode underscores the tall task of stifling China’s tech supply chain, despite a thicket of U.S. export controls and sanctions. Huawei, which has been bolstered by billions of dollars in state support in recent years, has become one of China’s tech national champions and sits at the forefront of the country’s AI ambitions.

Core to the Biden administration’s strategy is impeding China’s efforts in AI, which carry national-security implications because of their potential military applications. The Commerce Department’s Bureau of Industry and Security said it remained committed to “ensuring compliance” for the China-related export controls with advanced chips and noted it was aware of recent reports of potential violations.

The TSMC circuitry in question should be inaccessible to Huawei, which has faced U.S. sanctions since September 2020 over national-security concerns.

Based on a preliminary internal investigation, TSMC believes its technology was routed somehow through Sophgo, a Chinese chip company, though others could be involved, according to people familiar with the matter. A less-likely scenario discussed internally involves the TSMC circuitry—or “die” in chip-industry parlance—having been culled from a Huawei stockpile amassed before the U.S. sanctions hit more than four years ago, the people said.

What Sophgo may have purchased from TSMC hasn’t previously been reported. A TSMC spokesman said it would take prompt actions, including investigations, should any concerns arise and be in touch with U.S. 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 have an audience of more than 650 companies and 100,000 users.

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

The orders to Sophgo were flagged internally at TSMC last month, according to people familiar with the matter. The Taiwanese chip maker has also recently canceled Sophgo’s orders considered 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 links to Huawei in a statement posted on the company’s social-media account. The Chinese company added it had shared a detailed investigation report with TSMC to prove it wasn’t involved. Reached on Tuesday, the company referred to its prior statement.

The TSMC circuitry initially bought by Sophgo could have been offloaded into gray markets, industry officials say, which some chip buyers do when they end up with excess inventory.

Huawei said it has not produced any chips via TSMC since being sanctioned by the U.S. The Ascend 910B sits among Huawei’s top AI-related chips, designed for high-performance computing and intensive AI applications.

A separate TechInsights teardown last year on a different Huawei chip prompted a Commerce Department review. Echoing the report’s findings, Commerce Secretary Gina Raimondo said the U.S. export controls had succeeded at limiting the Huawei chip’s performance, making it “not nearly as good” as cutting-edge alternatives.

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