A chip made by Taiwan Semiconductor Manufacturing Co (TSMC) was found on a Huawei Technologies Co artificial intelligence (AI) processor, indicating a possible breach of US export restrictions that have been in place since 2019 on sensitive tech to the Chinese firm and others. The incident has triggered significant concern in the IT industry, as it appears that proxy buyers are acting on behalf of restricted Chinese companies to bypass the US rules, which are intended to protect its national security.
Canada-based research firm TechInsights conducted a die analysis of the Huawei Ascend 910B AI Trainer, releasing its findings on Oct. 9. The device is considered to be the most advanced AI chip available from a Chinese firm. The TSMC chip was part of a multichip system, Reuters reported.
After being informed of the discovery, TSMC on Oct. 23 said that it had notified the governments in Taipei and Washington of the issue. Taiwan also has export controls to prevent advanced chips from being made in China.
TSMC said that it had stopped all shipments to Huawei as of Sept. 15, 2020, in compliance with US regulations.
Reports a few days later said that TSMC had halted shipments to Chinese chip designer Sophgo, with sources telling Reuters that Sophgo had ordered chips from TSMC that matched the one found on the Huawei device.
Sophgo has denied any wrongdoing in the case.
Sophgo was established in 2019 and is affiliated with Bitmain, a Chinese cryptoequipment company that has offices in Taiwan. Bitmain’s Taiwan operations were raided in 2021, with prosecutors accusing two Bitmain affiliates of illegally recruiting Taiwanese engineers, and illegally conducting research and development activities. Bitmain reportedly used to have a cooperative relationship with Huawei and once introduced a former Huawei executive to sit on Sophgo’s board.
Chinese IT firms have long been seeking ways to access advanced equipment and technologies from other countries. Reuters in August reported that Chinese state-linked entities had turned to Amazon.com Inc’s cloud service, among others, to access advanced US chips and AI capabilities that they could not acquire otherwise.
While providing access to such chips or advanced AI models through the cloud is not a contravention of the US regulations, experts have warned that restricted items might be transferred by proxy buyers to China, which repackages them, disguising the components as Chinese-made. TSMC, as well as authorities in Taiwan and the US, must see the Ascend 910B incident as a warning about the reality of proxy buyers and the implications for national security. All three must carefully investigate how the TSMC chip ended up in Huawei’s possession.
TSMC founder Morris Chang (張忠謀) last month warned that the company is facing its most severe challenge, as “free trade of semiconductors has died.”
US Representative John Moolenaar, chairman of the House Select Committee on Strategic Competition between the US and the Chinese Communist Party, called the Huawei incident “a catastrophic failure” of US export control policies.
As a world-leading chipmaker with its hands full supplying international orders, TSMC would not want to risk its reputation and market access by flouting US regulations to sell chips to banned Chinese firms.
TSMC needs to enhance its mechanisms to spot suspect orders and monitor how its products are dispersed, especially as it builds more fabs outside Taiwan.
Meanwhile, the governments in Taipei and Washington, with TSMC’s cooperation, should fix policy loopholes to further safeguard the countries’ high-end technologies and industries.
Punishing the world’s No. 1 chipmaker would only weaken the IT capacity of democratic states while benefiting those of authoritarians.
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