The US government will add Sophgo, a Chinese technology company, to the Commerce Department’s Entity List due to its intermediary between blacklisted Huawei and TSMC, according to a report Reuters. For Sophgo, being placed on the Entity List means it will no longer be able to acquire advanced chips, effectively signaling the end of its operations. Huawei, on the other hand, will likely try to find other intermediaries to place orders for various chips from TSMC.
As of September 2020, Huawei cannot legally purchase chips made using American technologies (that is, virtually all chips). Sophgo has violated U.S. export regulations and is therefore expected to be added by the U.S. Department of Commerce to its Bureau of Industry and Security Entity List. Companies on the Entity List face strict export restrictions, requiring licenses for shipments, which are usually denied. As a result, Sophgo will not be able to place orders with TSMC or buy tokens outside China, which will spell the end for the company.
Earlier this year, Sophgo placed an order for Huawei-designed Virtuvian compute chiplets for the company’s Ascend 910 processor with TSMC, violating US sanctions. Research firm TechInsights discovered the issue while disassembling a Huawei Ascend 910 processor. After TSMC confirmed compliance, supplies to Sophgo were discontinued and U.S. and Taiwanese authorities were notified.
Sophgo is affiliated with Bitmain, a Chinese supplier of Bitcoin mining equipment. The company is owned by Micree Zhan, co-founder of Bitmain, who indirectly holds 23% of Sophgo through an investment company. While Sophgo has denied any direct or indirect collaboration with Huawei, Bitmain and Sophgo have reportedly supplied AI processors to Chinese government entities, including state-owned companies, universities and police departments, according to a Reuters report.
Bitmain, known for its Antminer brand, is a major supplier of cryptocurrency mining equipment. The company distanced itself from the controversy, saying it was not involved in the investigation. However, Sophgo communicated with the US Federal Communications Commission in 2023 using a Bitmain email address, which clearly suggests a link between the two companies.
While Huawei and other Chinese entities will not be able to employ Sophgo to purchase advanced chips, it appears to be common practice to employ proxies to obtain advanced processors that they should not be receiving. At this point, no one knows how many more intermediaries Huawei may employ to acquire these products.
