After Suspicious TSMC Incident New Trade Barrier: Taiwan Bans Chip Exports to SMIC And Huawei

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It is well known that the US government has been banning exports to Huawei for years. In June 2025, Taiwan imposed a chip export ban on companies SMIC and Huawei. This could be related to rumors that TSMC was made to supply Huawei through intermediaries.

China's semiconductor and AI expertise is constantly advancing, but it is believed that technological progress has not yet reached the know-how of other countries; for example, that of the USA and Taiwan, depending on the sector being considered.

That Chinese AI companies rely on Nvidia's technology was demonstrated, among other things, by the stir around AI prodigy DeepSeek. Although the system was reportedly built inexpensively and efficiently, Nvidia hardware was ultimately used.

The AI model DeepSeek-R1 is offered as a NIM microservice, specifically optimized for Nvidia H200/H800 GPUs. This doesn't necessarily mean that the latest or most powerful Nvidia GPUs are used. Instead, the software architecture and hardware work cleverly together.

After the trade restrictions by the US government in 2020, another hardware stream for the Chinese conglomerate Huawei seems likely to dry up in the future, namely the one across the Taiwan Strait. According to reports, the Taiwanese government prohibits supplying chips to SMIC and Huawei.

Consequence of Straw-Man Orders?

Whether there are parallels or the expansion of Taiwan's "Hightech Commodities Entity List" in June 2025 was purely coincidental is not officially known. The fact is, however, that this announcement also comes in the wake of claims that Huawei allegedly used shell companies to entice TSMC into manufacturing products with advanced architecture, the transfer of which to Huawei would have been prohibited. "Stricter government controls should prevent similar errors in the future," writes Mark Tyson from Tom's Hardware.

In November 2024, contract manufacturer TSMC contacted the U.S. Department of Commerce after discovering that Huawei's AI accelerators contained technology that was very similar to TSMC's. There were many possible explanations for this incident. It was suspected that TSMC chips might still be coming from Huawei's stockpile. There was speculation about whether SMIC had become capable of replicating certain TSMC technologies or if it was hardware ordered by chip designer Sophgo from TSMC, which then ended up in Huawei's chips. It was at least assumed that TSMC technology might have been smuggled into the country through intermediaries. The latter cannot be ruled out, considering creative AI chip "smuggling routes" via India to Russia and Belarus.

For TSMC, however, the whole matter is unpleasant, because since September 2020, the company has been prohibited from supplying Huawei according to US trade restrictions. When the discovery of TSMC hardware in Huawei AI accelerators became known, both companies denied any current trade relations.

Fines Amounting to One Billion US Dollars Threaten

In April 2025, Reuters reported that the U.S. Department of Commerce was indeed investigating TSMC over the incident. Reuters reporters cited two insiders who indicated that TSMC faced potential fines of one billion US dollars or more. An official proceeding or penalty notice has not yet been published.

"TSMC has produced nearly three million chips in recent years that matched the design ordered by Sophgo and probably ended up with Huawei," Reuters quotes researcher Lennart Heim from the RAND Technology and Security and Policy Centre, who follows Chinese developments in the AI field. (sb)

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