Taiwan Semi halts supply to China firm after chip ends up in Huawei product – report; Sophgo denies any link with Huawei

Taiwan Semiconductor Manufacturing (NYSE:TSM) halted shipments to Chinese chip designer Sophgo after a TSM chip ended up in an AI processor by Huawei Technologies, Reuters reported citing people with knowledge of the matter.

Sophgo had ordered chips from the Taiwan-based tech giant which matched the one seen on Huawei’s chip Ascend 910B, the report added.

Sophgo said in a statement on its website that the investigation by the U.S. Commerce Department is not related to Sophgo and that it has never been engaged in a business relationship with Huawei.

Sophgo noted that it has provided a detailed investigation report to TSM to prove that the company is not related to the Huawei probe. The company added that it has been conducting its business in compliance with all applicable U.S. laws.

Last week, Reuters reported that TSM had halted shipments to a customer, citing a Taiwanese official with knowledge of the matter. The official did not name the client, however, Reuters’ sources identified it as Sophgo.

TSM had alerted U.S. officials after TechInsights took apart a Huawei product and found one of TSM’s chips, according to a prior report.

Last week, TSM said in an emailed statement to Seeking Alpha that it “proactively communicated with the US Commerce Department regarding the matter in the report.” The company had noted that it was not aware of TSM being the subject of any investigation at that time.

Meanwhile, a spokesperson for the U.S. Department of Commerce had said to Seeking Alpha previously that “BIS [Bureau of Industry and Security] is aware of reporting alleging potential violations of U.S. export controls.” The department added that it could not comment on whether any investigation was ongoing.

Sophgo is affiliated with cryptocurrency mining equipment company Bitmain, according to the report. In August, the Research Institute for Democracy, Society and Emerging Technology, or DSET, in Taiwan reported that Bitmain was “aiming to challenge the AI chip market dominance of Nvidia (NVDA) and AMD (AMD),” the report added. The DSET report had noted Sophgo as a Bitmain affiliate.

Huawei’s Ascend 910B chips are used in China to train large language models, or LLMs, that power AI-chatbots, and were made to rival chips from Nvidia (NVDA).

Nvidia and other American companies do not supply advanced chips to China due to U.S. export curbs. Huawei was once in competition with Apple (AAPL) and Samsung (OTCPK:SSNLF) to be the world’s biggest handset maker until U.S. restrictions, starting in 2019, began to curb its access to chip manufacturing tools needed to produce its most advanced models.