The ongoing controversy regarding Huawei's semiconductor dealings has led Sophgo, a Chinese client of TSMC, to clarify its relationship with Huawei. As the US imposes stricter export controls on AI chips, scrutiny of Chinese semiconductor companies is intensifying. This increased oversight may hinder future chip orders from Chinese clients at TSMC, potentially affecting China's ambitions in the AI sector.
The TechInsights report raised alarms in the IC design sector, leading Alchip to categorically deny any involvement with Huawei. Sophgo issued a three-point statement in English to distance itself from Huawei while providing clarifications to TSMC. Both companies are taking proactive steps to manage the fallout from increased scrutiny. As of now, neither TSMC, Huawei, nor the US Department of Commerce has provided formal responses.
Sophgo key insights
Sophgo, a leading provider of computing power, is affiliated with Bitmain, a key player in designing application-specific integrated circuit (ASIC) chips for Bitcoin mining. Founded by Micree Zhan and Jihan Wu in 2013, Zhan previously led DivaIP, a startup enabling TV streaming to computer screens via set-top boxes, while Wu was a financial analyst and private equity fund manager, recognized as a notable figure in China's cryptocurrency landscape.
Micree Zhan, a graduate of the Institute of Microelectronics of the Chinese Academy of Sciences (IMECAS), rose to prominence as Bitmain's mining machines secured him a place among China's wealthiest individuals. However, he has recently been involved in a highly publicized conflict with co-founder Jihan Wu over the company's strategic direction.
Zhan advocated for Bitmain to diversify beyond mining chips into broader applications, including AI and high-performance computing (HPC). To realize this vision, he founded startups like Sophon Technologies and Sophgo, which aim to expand into new markets and distinguish themselves from Bitmain's original focus on crypto mining.
Bitmain specializes in blockchain technology, primarily producing mining chips and offering end products such as specialized servers and modules for cryptocurrency operations. In contrast, Sophgo targets general-purpose computing applications, utilizing its processing power to support urban management solutions, including smart city initiatives and city brain platforms.
Sophgo's processors are categorized into three main series: the BM series, derived from Bitmain and utilizing Arm architecture; and the SG and CV series, based on RISC-V architecture. The company offers comprehensive support, guiding customers from design through to manufacturing. However, industry insiders indicate that even Sophgo may not fully grasp where potential production issues might arise.
Sophgo's RISC-V chips integrate AI and machine learning capabilities, serving applications such as video analysis and real-time urban management. Processors like the SG2000 series emphasize versatility by supporting both RISC-V and Arm cores, aiming to address diverse customer needs while capitalizing on the increasing demand for AI-enabled hardware.
TSMC's rigorous client vetting
IC design companies have rapidly distanced themselves from Huawei to mitigate legal and reputational risks. They are aware that any association could lead to lawsuits from TSMC and risk increased scrutiny from the US government.
In light of stricter US export controls on China's semiconductor and AI sectors, TSMC has taken a cautious stance toward new Chinese clients, particularly those with unclear backgrounds. Industry insiders indicate that TSMC implements rigorous vetting processes for sensitive areas such as computing and radio frequency chips. This includes comprehensive due diligence, requiring clients to provide detailed documentation regarding product applications and supply chains before approval. Establishing an account with TSMC is complex, leading to numerous rejections among Chinese clients.
Companies that cannot establish direct relationships with TSMC are increasingly turning to IC design service providers like Alchip and Global Unichip for access to TSMC's manufacturing capacity. Chinese firms such as VeriSilicon and Brite Semiconductor are adopting similar models, assisting niche players in obtaining foundry services.
TSMC's recent oversight, in line with US regulations, serves as a critical lesson for its order management processes. This incident may stimulate discussions on corporate governance within the board, especially as TSMC has recruited experts in US export controls and technology policy. Improving crisis management strategies and preventing potential oversights could be the key takeaways from this experience.
