Huawei Uses TSMC Loophole To Bypass US Chip Ban

The official said TSMC opened an investigation and suspended its shipments to a mainland client in mid-October after learning its chips had been found in a Huawei product. The official did not disclose the client's name but described the incident as an“important warning event” within TSMC.

The official said the earliest the incident can be traced back to is October 11. TSMC had then notified the Taiwanese government and the US Commerce Department that the shipment of the chip could reveal a possible violation of US export restrictions on Huawei.

The Reuters report came after The Information reported on October 18 that the US Commerce Department had started an investigation into whether TSMC violated US export rules to make chips for Huawei.

The timeline of the incidents also matched what a Chinese technology columnist had said October 9 in an article with the title“After TSMC and Huawei split up, Huawei will achieve self-sufficiency.”

The columnist said that TSMC has decided to split up with Huawei as it will no longer make chips for the latter, which will then have to make its 5G and Ascend chips domestically.

Previous media reports showed that Huawei and SMIC had tried to make Ascend 910B chips by themselves earlier this year but failed to achieve satisfactory results.

The Information reported on June 25 that Huawei and SMIC had faced obstacles in the making of the Ascend 910B due to an insufficient supply of chip-making machine parts. The Chosun Daily in South Korea said on June 27 that the production yield of Ascend 910B is only around 20%.

It is unclear whether Huawei had already given up this production. But now SMIC's N+2 process seems to be the only way that Huawei can rely on to make 7nm chips, including the coming Ascend 910C chips.

Huawei offered samples of Ascend 910C to large Chinese server companies for hardware testing and configuration, the South China Morning Post reported on September 30. It planned to initially produce 70,000 units of this chip, which aims to compete with Nvidia's H100.

In May 2019, the US Commerce Department put Huawei and its 70 affiliates on its so-called Entity List on national security grounds. In the same year, the Dutch government banned the exports of ASML's extreme ultraviolet (EUV) lithography machines to China due to diplomatic pressure from the US.

On September 15, 2020, TSMC stopped producing Kirin chips, resulting in a countdown for HiSilicon's chip inventory.

Over the past few years, there have been media reports saying that Huawei faced a shortage of high-end chips for its flagship smartphones and that it successfully used SMIC's N+2 process to make 7nm Kirin 9000S chips.

TechInsights also confirmed that the Kirin 9000S chips found in Huawei's Mate 60 smartphones last year were made by SMIC.

However, Chinese media have never reported that Huawei was running out of its Ascend 910 chips and Ascend 910B although the company was significantly expanding its server production.

On July 6 last year, Huawei said it would boost the number of AI processing cards from 4,000 to 16,000 in each of its AI clusters in seven Chinese cities.

At that time, some Chinese commentators said TSMC was allowed to produce Ascend 910 for Huawei as the chip used Huawei's self-developed Da Vinci architecture. But then these articles were removed from the Internet in China.

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Other commentators thought that all the Ascend 910B chips, with an expected supply of 500,000 units in 2024, were all made by SMIC. But now they may have to rethink after knowing that TSMC-manufactured Ascend 910B chips were found in Huawei's products.

On Wednesday, Huawei said it has not produced any chips via TSMC since 2020. TSMC also said it has not supplied to Huawei since mid-September 2020. The Taiwanese chipmaker said it was not aware of itself being the subject of any investigation at this time.

A spokesperson for the US Commerce Department declined to comment on whether any investigation is ongoing.

Sanctioned entities can easily circumvent US sanctions as they can hide themselves by setting up layers of shell companies or only holding minority stakes in companies, Nazak Nikakhtar, who was assistant secretary for industry and analysis at the US Department of Commerce's International Trade Administration (ITA) from 2018 to 2021, told Asia Times in an interview in June.

No matter whether TSMC is being probed by the US or not, it will have to explain why it did not raise any red flags when a mainland client placed an order to make the Ascend 910B, which is similar to the Ascend 910 on which it had already completed the design process (taped out” in industry jargon) before 2019. TSMC had also taped-out and mass-produced other Huawei AI chips such as Ascend 310 and 990.

Read: Huawei bypasses US chip curbs with TSMC loophole

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