Last weekend, the US ordered Taiwan Semiconductor to halt all shipments of advanced chips, meaning chips with designs of seven nanometers or less, to China. The reason: tech research firm TechInsights discovered a TSMC chip inside one of Huawei’s Ascend 910B AI processors. The Ascend 910B is largely seen as the most advanced AI chip made by any Chinese company. Huawei, one of China’s most important technology companies, is on a US restricted trade list that should prevent it from accessing TSMC chips, and this discovery by TechInsights put DC on high alert.
The semiconductor power struggle between the US and China has been one of the defining events of Joe Biden’s presidency. In August 2022, President Biden signed the CHIPS and Science Act, a $280 billion bill that sought to invest in domestic research and manufacturing for semiconductors in the United States. The bill was meant to reduce the geopolitical risk of America’s dependency on Taiwan, located just 100 miles from China, for its chip supply.
Two months later, In October 2022, the Bureau of Industry and Security said that semiconductor chips in China had been used to “produce advanced military systems including weapons of mass destruction” and “commit human rights abuses,” prompting the Biden Administration to issue a “broad set of prohibitions” on exports of semiconductor chips and other high tech equipment to China. As part of these prohibitions, the Export Administration Regulations were granted scope over “certain foreign-produced advanced computing items and foreign-produced items for supercomputer end uses,” hence the US’s ability to enforce export restrictions on TSMC.
While the export bans were intended to hinder China’s semiconductor progress, this latest security breach highlights the difficulty of enforcing these restrictions.
On October 26, Reuters reported that Sophgo, a Chinese chip designer affiliated with the cryptocurrency mining equipment company Bitmain, had ordered chips from TSMC that matched the chip found on the Huawei AI processor. Sophgo denied any wrongdoing, saying that it was “in compliance with all laws and had never engaged in any business relationship with Huawei.
However, while Sophgo may not have engaged in business with Huawei directly, it’s possible that chips from TSMC could have been offloaded by Sophgo in gray markets, as chip buyers often do when they have excess inventory.
Between the ever-increasing chip restrictions of the Biden Administration and the looming possibility of increased tariffs on Chinese goods once Donald Trump reenters the Oval Office in January, trade tensions between the US and China will be one of the biggest geopolitical stories to watch as we enter 2025, especially given its implications for the AI arms race between China and the US.
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