U.S. to Blacklist Chinese Firm Sophgo for Alleged Illegal Use of TSMC Chip in Huawei AI Processor

Biden Administration Targets Chinese Firm Over Taiwan Semiconductor Chip Found in Huawei Tech - Taiwan Semiconductor (NYSE:TSM)

Taiwan Semiconductor suspended shipments to Sophgo after identifying its chip design in Huawei's system, citing security concerns. Chinese company Sophgo whose Taiwan Semiconductor Manufacturing Co TSM-made chip was allegedly found in a Huawei Technologies Co artificial-intelligence processor, faces potential blacklisting from the U.S. Bitcoin mining equipment supplier Bitmain affiliate Sophgo is the latest Chinese company potentially on the U.S. semiconductor embargo list, citing national security threats, Reuters reports. In October, tech research firm TechInsights reportedly discovered the Taiwan Semiconductor chip in the Huawei 910B and told the chipmaker, which notified the U.S. Commerce Department. Also Read: Nvidia Secures EU Approval For Run:ai Deal, US Probes China Export Breach After determining the chip matched Sophgo's design, Taiwan Semiconductor suspended shipments to the company. Sophgo, a supplier to local governments and state-owned firms like China Telecom, denied the charges in October. Huawei also denied the allegations, Reuters report said. On November 11, the U.S. urged Taiwan Semiconductor to suspend shipments of seven-nanometer or more advanced chips to China. The U.S. sanctions forbid exporters from shipping goods and technology without a license, which will likely be denied. In December, the U.S. government sanctioned 140 Chinese semiconductor firms, including chip equipment manufacturers such as Naura Technology Group and others, targeting advanced memory chips and chipmaking tools. The U.S. added telecom equipment maker Huawei to its Entity List in 2019, restricting its access to foreign-made chips since 2020. However, over the past two years, Chinese state-run universities building AI tools and police stations splurged on Sophgo and Bitmain AI chips to upgrade their capabilities. The U.S. sanctions prompted Huawei to diversify into an AI chip powerhouse. China considers Huawei's Ascend 910B the most advanced AI chip in the country. Huawei plans to commercialize its Ascend 910C in early 2025 to rival Nvidia Corp NVDA. Taiwan Semiconductor stock is trading upwards on Monday. At the end of last week, the Taiwanese contract chipmaker's stocks were trading at ~ a 25% premium to those in its domestic market, Bloomberg reports, signaling investors' conviction in the AI frenzy. This marks a record premium since October 17, beating the quarter's daily average of 19%. Price Action: TSM stock is up 1.75% at $200.67 premarket at last check Monday. Also Read: US-Listed Chinese Stocks Fall As China's Central Bank Keeps Key Rates Steady Photo via Shutterstock Market News and Data brought to you by Benzinga APIs

US plans to blacklist company that ordered TSMC chip found in Huawei processor, source says

Companies are added to the list for activities contrary to U.S. national security and foreign-policy interests. Exporters are then barred from shipping goods and technology to them without a license, which is likely to be denied. China's Huawei, a telecommunications equipment maker and technology conglomerate, was placed on the list in 2019. Since 2020, it has been a violation to ship even foreign-made chips to the company without a license.The Biden administration plans to blacklist a Chinese company whose TSMC-made chip was illegally incorporated into a Huawei artificial intelligence processor, according to a person familiar with the matter. The Chinese company, Sophgo, drew attention after a chip found on Huawei's Ascend 910B multi-chip system matched one it ordered from Taiwan Semiconductor Manufacturing Company . Sophgo is the latest Chinese company slated to be punished by the U.S. for helping Huawei. This month, the Commerce Department added other companies viewed as part of Huawei's shadow network to the U.S. Commerce Department's restricted trade list. Sophgo, an affiliate of bitcoin mining equipment supplier Bitmain, is in the process of being placed on the list, known as the Entity List, the source said. Companies are added to the list for activities contrary to U.S. national security and foreign-policy interests. Exporters are then barred from shipping goods and technology to them without a license, which is likely to be denied. China's Huawei, a telecommunications equipment maker and technology conglomerate, was placed on the list in 2019. Since 2020, it has been a violation to ship even foreign-made chips to the company without a license. A U.S. Commerce Department spokesperson declined to comment. Sophgo did not immediately respond to requests for comment. In an October statement, the company said it "has never been engaged in any direct or indirect business relationship with Huawei." Sophgo is a supplier to local governments and state-owned firms such as China Telecom, according to tenders reviewed by Reuters. Over the past two years, Sophgo and Bitmain AI chips have been bought by Chinese state-run universities building AI tools and police stations looking to upgrade their surveillance capabilities, according to the tender review. Research firm discovered chip tech research firm TechInsights took apart the Huawei 910B, discovered the TSMC chip and informed the chipmaker, which notified the U.S. Commerce Department, as Reuters reported in October. After determining the chip matched Sophgo's design, TSMC suspended shipments to the company, sources have said. TSMC, the world's largest contract chipmaker, said in October it has not supplied Huawei since 2020. A Taiwan official said that month that TSMC alerted Taiwan and U.S. authorities and began a detailed investigation. A TSMC spokesperson declined comment on Friday about what the investigation had turned up. Starting on Nov. 11, the U.S. ordered TSMC to halt shipments to China of seven-nanometer or more advanced chips that could be used in AI applications, as Reuters exclusively reported. Huawei said in October it has not produced any chips via TSMC since the U.S. imposed new export rules on the company in 2020. It did not immediately respond to a request for comment on Friday. Once hobbled by the U.S. restrictions, Huawei has since diversified and re-emerged at the center of China's AI-chip ambitions. The company's Ascend 910B, released in 2022, is viewed as the most advanced AI chip available from a Chinese company. Huawei plans to start mass producing its newest chip, the Ascend 910C, meant to rival U.S. AI chipmaker Nvidia in early 2025, as Reuters reported last month. Sophgo was co-founded by Micree Zhan, who also co-founded Bitmain, according to a corporate registration database. Zhan still indirectly owns 23% of Xiamen Sophgo Technologies Ltd, and five of its subsidiaries via an investment vehicle, Beihaishan Beside Investment Partnership, which he owns in full, according to Wirescreen, a business-intelligence platform and corporate records reviewed by Reuters. Sophgo communicated with the U.S. Federal Communications Commission in 2023 using a Bitmain email address. Bitmain said on social media on Oct. 28 that it "is not involved in or otherwise related to the supply chain investigation." Bitmain's website says it is the world's leading manufacturer of digital currency mining servers through its brand Antminer, and that it has customers in over 100 countries.

Biden administration to blacklist Chinese firm over illegal TSMC chip use By Investing.com

Investing.com -- The Biden administration is preparing to add Chinese chip designer Sophgo to the U.S. Commerce Department's Entity List, according to an individual with knowledge of the situation. Sophgo, an affiliate of bitcoin mining equipment provider Bitmain, has been implicated in the illegal use of a chip made by Taiwan Semiconductor Manufacturing Corp. (TSE:TSMC) in a Huawei AI processor. The move to blacklist Sophgo comes after the company was identified as having ordered a chip from TSMC that was identical to one found in Huawei's Ascend. The Commerce Department, when contacted, declined to make a comment on the situation. This action against Sophgo is part of the broader U.S. government strategy to regulate the use of technology that could potentially pose a national security risk. The Entity List identifies foreign parties that are barred from receiving certain items subject to U.S. export regulations. The decision to blacklist Sophgo demonstrates the Biden administration's ongoing scrutiny of Chinese technology firms and their supply chains.

US gov't set to ban Huawei intermediary Sophgo over AI chip supplies -- partnership skirted US chip sanctions

The U.S. government will add Sophgo, a Chinese tech company, to the Department of Commerce's Entity List for being an intermediary between blacklisted Huawei and TSMC, reports Reuters. For Sophgo, being placed on the Entity List means that it will no longer be able to procure advanced chips, effectively signaling the end of its operations. On the other hand, Huawei will likely try to find other intermediaries to place orders for different chips from TSMC. Since September 2020, Huawei has been unable to legally purchase chips made using American technologies (i.e., virtually all chips). Sophgo violated U.S. export rules, and the U.S. Commerce Department is therefore expected to add it to its Bureau of Industry and Security's Entity List. Companies on the Entity List face stringent export restrictions, requiring a license for shipments, which are usually denied. As a result, Sophgo will be unable to place its orders with TSMC or buy chips outside of China, spelling the end for the company. Earlier this year, Sophgo placed an order for Huawei-designed Virtuvian computing chiplets for the company's Ascend 910 processor with TSMC, violating U.S. sanctions. Research firm TechInsights uncovered the issue during a teardown of Huawei's Ascend 910 processor. After TSMC confirmed the match, it ceased shipments to Sophgo and alerted U.S. and Taiwanese authorities. Sophgo is affiliated with Bitmain, a Chinese Bitcoin mining equipment supplier. The company is partly owned by Micree Zhan, Bitmain's co-founder, who indirectly holds a 23% stake in Sophgo through an investment company. Although Sophgo has denied any direct or indirect business with Huawei, Bitmain and Sophgo have reportedly supplied AI processors to Chinese government entities, including state-owned firms, universities, and police departments, according to a Reuters report. Bitmain, known for its Antminer brand, is a major supplier of cryptocurrency mining hardware. The company has distanced itself from the controversy, stating that it is not involved in the investigation. However, Sophgo communicated with the U.S. Federal Communications Commission in 2023 using a Bitmain email address, which clearly suggests a connection between the two companies. Although Huawei and other Chinese entities will be unable to use Sophgo to procure advanced chips, it appears to be a common practice to use proxies to obtain sophisticated processors they are not supposed to obtain. At this point, no one knows how many more intermediaries Huawei might be using to acquire those products.