As we reported a few days ago, Taiwan Semiconductor Manufacturing Company (TSMC) has come under investigation by U.S. authorities, who are looking into claims that the company may have supplied chips to Huawei, despite export bans. The U.S. Department of Commerce is currently focused on determining if TSMC breached regulations designed to restrict Huawei’s access to advanced semiconductors.
A new report by the Financial Times sheds light on how the investigation came about. The inquiry by US authorities was initiated after TSMC flagged a customer order, suggesting it resembled Huawei’s Ascend 910B chip. This high-performance processor is essential for artificial intelligence (AI) operations, particularly for training large models. Since 2020, Huawei has been banned from acquiring chips made using U.S. technology, so the potential breach is raising alarms.
Huawei’s Workaround Attempts
Despite the strict sanctions, Huawei seems to have continued accessing restricted tech. The company’s latest Mate 60 smartphones are rumored to include 7nm chips from China’s own Semiconductor Manufacturing International Corporation (SMIC), sparking concern among U.S. lawmakers. This raises questions about how far Huawei’s supply chain has managed to circumvent restrictions. Reports also indicate that other companies like Pengzinzu and SwaySure Technology could be intermediaries, helping Huawei dodge export bans.
TSMC isn’t just a giant in Taiwan; it’s one of the most important companies globally when it comes to producing semiconductors. Its customer base includes American heavyweights like Nvidia and Apple. These partnerships make the ongoing investigation all the more critical. While TSMC asserts that it follows all export regulations, the U.S. Commerce Department will be investigating whether any lines were crossed regarding its dealings with Huawei.
The company’s plans to build new chip production facilities in Arizona add more weight to the situation. The U.S. government has committed $6.6 billion in subsidies to help support this expansion, but those plans could be derailed if any violations are found.
Broader Implications of the Probe
The potential violation isn’t just about TSMC and Huawei. U.S. efforts to limit China’s tech advancements are part of a wider strategy aimed at slowing down the country’s progress in AI and other advanced fields. China has made strides in filing AI patents, surpassing the U.S. in recent years, but the country still relies on foreign companies like TSMC for cutting-edge semiconductor technology.
The U.S. and its allies, including Japan and the Netherlands, have imposed export restrictions, particularly on the kind of chips that are vital for AI development. As a result, China has struggled to get its hands on the high-performance hardware needed to train complex AI models.
The outcome of this probe could have far-reaching consequences. f the investigation finds that TSMC violated export controls, those relationships—and the substantial government funding supporting its U.S. expansion—could be jeopardized.
U.S.-based companies like Qualcomm and Broadcom also rely heavily on TSMC’s chip manufacturing capabilities, so any disruption in its operations could have a ripple effect on the broader tech industry. Investors and analysts alike are closely watching how this situation unfolds, as it could impact the supply of AI chips and other semiconductors globally.
Huawei has been at the center of this U.S.-China tech struggle. After being targeted by U.S. sanctions in 2020, the company’s access to advanced chips was severely restricted. This has led Huawei to explore alternative ways to secure the necessary tech, including relying on domestic manufacturers like SMIC.
In September, TSMC formed a partnership with OpenAI, signaling the start of work on custom AI chips. These chips will use TSMC’s A16 process node, which is expected to go into mass production by 2026. OpenAI is looking to reduce its reliance on other suppliers and strengthen its internal AI infrastructure with TSMC’s technology. According to reports, TSMC’s upcoming A16 process technology is expected to offer significant performance and efficiency improvements compared to their N2P process, a huge advantage in AI operations.
U.S.-China Tech Competition
The investigation takes place against the backdrop of a larger U.S.-China competition in AI. The U.S. leads in developing generative AI systems, while China is not far behind. Some analysts say China is only six months to two years behind the U.S. in the race to dominate the AI landscape.
While China’s advancements in AI have accelerated, the U.S. still holds an edge, largely due to Silicon Valley’s influence. U.S. firms such as Google, Nvidia, and OpenAI continue to push the boundaries of AI development, while China’s progress is often driven by state-backed efforts.
TSMC’s role in this global tech competition cannot be understated, and the outcome of the investigation could shift the balance of power in the semiconductor market. The stakes are high, with AI technologies playing a crucial role in the economies and military capabilities of both the U.S. and China. The next steps in the U.S. investigation will likely have a significant impact on how the two superpowers approach the AI and semiconductor sectors moving forward.
Last Updated on November 7, 2024 2:24 pm CET
