New Delhi

Taiwan Semiconductor Manufacturing Co. (TSMC) has suspended shipments to a client after discovering that chips it produced for them were used in products by Huawei Technologies Co., potentially violating US sanctions aimed at restricting technology flow to the Chinese tech giant as detailed in a report by Bloomberg.

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In mid-October, TSMC learned that semiconductors intended for a particular customer had made their way into Huawei's offerings. A source with direct knowledge of the situation, who requested anonymity due to the sensitive nature of the matter, stated that TSMC has informed both US and Taiwanese authorities and is conducting a detailed investigation, the Bloomberg report detailed further.

The exact identity of the TSMC client still remains unclear, including whether they were acting on Huawei's behalf and their geographic location. This incident has drawn renewed attention following reports, including from The Information, that US officials recently contacted TSMC to inquire about any chip production for the blacklisted Chinese company.

This development raises critical questions about how Huawei, which is often viewed as China's leading contender in the semiconductor sector, obtained advanced chips. TechInsights, a research firm, recently identified TSMC-manufactured processors in Huawei's new AI servers.

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Since being placed on a sanctions list in 2020, Huawei has been prohibited from sourcing chips from TSMC and similar companies without obtaining a US government license. Over the past year, Huawei has turned to local partner Semiconductor Manufacturing International Corp. (SMIC) for chip production, including a 7-nanometer chip introduced in a Huawei smartphone last August. However, US officials have raised concerns about SMIC's capacity to produce 7-nm chips at scale.

While TSMC asserts that it ceased all shipments to Huawei after September 15, 2020, the recent findings complicate this narrative. A TSMC representative declined to comment further on the situation, while Huawei's spokesperson had no immediate response to Bloomberg's inquiries. A US Commerce Department representative acknowledged awareness of reports suggesting potential violations of export controls.

TSMC emphasised its commitment to complying with all applicable laws and regulations, including export controls, and stated that it has been in proactive communication with the US Commerce Department regarding the situation. Meanwhile, Huawei reiterated that it has not produced any chips through TSMC since the US amendments targeting the company in 2020.

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Republican Representative John Moolenaar, who chairs the House China Select Committee, described the revelation of TSMC-made chips in Huawei devices as a "catastrophic failure" of US export control policy, calling for urgent clarity from both TSMC and the Bureau of Industry and Security (BIS) regarding the extent of this issue.

Taiwan's Minister of Economic Affairs, J.W. Kuo, stated that the country respects US export control measures and will fully communicate this to TSMC. In mid-October, BIS officials met with TSMC executives to discuss supply chain issues, including the potential for third-party distributors to provide restricted technology access to China.

The growing demand for AI accelerators, essential for developing artificial intelligence models, makes this issue particularly pressing, as leading firms like Nvidia rely on TSMC for their cutting-edge products, which are heavily restricted from being exported to China.