Huawei obtained millions of advanced AI chips from TSMC through shell companies last year, bypassing U.S. export controls. TechInsights and TSMC uncovered the scheme, which let China's tech giant get technology it wasn't supposed to have.
The numbers tell the story. Huawei got two million Ascend 910B logic dies – enough to build a million AI chips, according to a Center for Strategic and International Studies report. TSMC has stopped shipping to Huawei's front companies and started an investigation, but the chips are already in China.
Huawei timed it well. When Bloomberg revealed U.S. plans to block memory chip sales to China in August 2024, Huawei stocked up on HBM chips before the December deadline.
The story traces back to 2019. Back then, Huawei worked openly with TSMC to make the Ascend 910 chip, using TSMC's advanced 7nm process. U.S. sanctions in 2020 forced Huawei to change plans.
Instead of giving up, Huawei redesigned its chips for SMIC, China's main chipmaker. They made the Ascend 910B on SMIC's first 7nm process, then the 910C on their second-generation technology. But here's the twist: While working with SMIC, Huawei secretly bought TSMC chips through shell companies.
The new chips have problems. Many ship with disabled parts, and only 75% survive final assembly. But they work well enough for DeepSeek, China's rising AI company, which says the Ascend 910C runs at 60% of Nvidia's H100 speed. That's not enough to train AI models from scratch but works fine for running existing ones.
This matters because it shows a major gap in export controls. Companies can dodge the rules through shell companies and complex supply chains. It's like finding out your security system has blind spots – you can fix them, but you worry what else you missed.
China wants to build its own chip industry. While SMIC's chips don't match TSMC's quality yet, they're improving. Meanwhile, Huawei plays both sides – developing domestic technology while finding creative ways to get foreign chips.
Western policymakers face tough choices. Traditional export controls aren't working well against determined companies with legal teams and shell companies. The lines between legal business and sanctions dodging keep getting blurrier.
Why this matters:
- Export controls have big holes. Companies with enough lawyers and shell companies can get around them.
- China's chip industry still lags behind, but they're catching up through a mix of building their own technology and buying what they can't make.
Read on, my dear:
CSIS study: DeepSeek, Huawei, Export Controls, and the Future of the U.S.-China AI Race
