TSMC Halts Chip Shipments to Bitmain-Linked Sophgo Amid Huawei Sanctions Probe

Taiwan Semiconductor Manufacturing Company (TSMC), a global leader in semiconductor manufacturing, has reportedly ceased chip shipments to Xiamen Sophgo, a Chinese semiconductor company linked to Bitmain’s co-founder and chairman, Micree Zhan. This action comes amidst an ongoing U.S. investigation into potential sanctions violations involving the tech giant Huawei.

Reports indicate that TSMC stopped supplying chips to Sophgo earlier this month. This decision aligns with the U.S. Commerce Department’s inquiry into whether TSMC indirectly supplied semiconductors to Huawei, which has faced significant U.S. sanctions since 2020 due to concerns over national security. These sanctions have imposed stringent limitations on Huawei’s access to cutting-edge technologies.

In a significant move, TSMC terminated its shipments to Sophgo, an AI-focused entity associated with Bitmain, after discovering that TSMC-manufactured chips were present in a Huawei AI processor. Sophgo was reportedly procuring chips from TSMC that were of the same type used in Huawei’s Ascend processor, which is now under scrutiny. The U.S. has been vigilant in its efforts to prevent Huawei from acquiring technology that could pose a threat to its national security interests.

There’s a lack of confirmation regarding whether Xiamen Sophgo directly provided chips to Huawei. The main issue revolves around how this situation might influence the ongoing business relationship between Sophgo and TSMC. Bitmain, a private enterprise headquartered in Beijing, China, is renowned for developing application-specific integrated circuit (ASIC) chips primarily used for bitcoin mining.

The current situation brings complications as the U.S. Commerce Department and TSMC have unearthed that some semiconductors produced for Xiamen Sophgo bear similarities in design to those used by Huawei in AI computing. This discovery has led to heightened scrutiny and possible ramifications for the involved parties.

Founded in 2019 by Micree Zhan, Xiamen Sophgo had been a significant customer of TSMC, receiving hundreds of thousands of chips. Chinese corporate records reveal that Zhan owns an indirect stake of nearly 22.5% in Sophgo, further linking Bitmain’s interests to the chipmaker. Additionally, various subsidiaries associated with Sophgo share domain registrations and email contacts with Bitmain.

TechInsights, a notable tech analysis organization, revealed that TSMC produced the Huawei HiSilicon Ascend 910B AI chip. This new version contrasts with its predecessor, the Ascend 910A, manufactured by SMIC, a Chinese domestic chipmaker. Following this revelation, TechInsights promptly informed TSMC, prompting further investigations.

The U.S. Commerce Department inquired earlier this October about TSMC’s potential production of AI or phone chips for Huawei. This inquiry coincided with TSMC’s subsequent decision to halt shipments to an undisclosed client, presumably connected to the ongoing U.S. inspection.

Under Micree Zhan’s strategic guidance, Bitmain ventured into AI chip development in 2018, aiming to broaden its chip offerings. However, this diversification led to a clash with co-founder Jihan Wu, who preferred the company’s focus remain on Bitcoin ASICs. The resulting discord and management challenges escalated into a corporate power struggle, culminating in Zhan’s ousting in late 2019.

Ironically, Zhan’s removal coincided with the anticipated announcement of Sophgo’s “third-generation AI chip,” the BM1684, set to debut at a conference in Shenzhen. This chip continues to be advertised on Xiamen Sophgo’s website. Eventually, in 2021, a settlement was reached, enabling Zhan to return as chairman, with Wu departing to lead Bitdeer and Matrixport. Subsequently, Bitmain ceased its direct involvement in AI chip development.

This scenario underscores the intricate interplay of geopolitics, technology, and business, as companies navigate complex international regulations while striving to maintain their competitive edge in the rapidly evolving tech landscape. The outcome of the U.S. investigation will likely have significant implications for all parties involved, potentially reshaping the competitive dynamics within the semiconductor and tech industries.