What's Going On With Taiwan Semiconductor Stock On Monday?

Taiwan Semiconductor Manufacturing Co TSM has halted shipments to China-based chip designer Sophgo after discovering its self-made chip on Huawei Technologies Co’s Ascend 910B AI processor.

Sophgo, linked to cryptocurrency mining company Bitmain, reportedly ordered chips identical to those in Huawei’s processor, according to Reuters.

Although the specific route the chip took to end up in Huawei’s product remains unclear, Taiwan Semiconductor alerted both U.S. and Taiwanese authorities about two weeks ago and initiated an in-depth investigation.

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Prior reports indicated that Chinese companies bypassed the U.S. semiconductor embargo by using different techniques to obtain sophisticated AI chips.

According to Reuters, Taiwan Semiconductor, Sophgo, and Huawei claimed ignorance regarding the violation and acknowledged compliance with the semiconductor embargo since its inception.

Sophgo insisted it complies with all legal requirements and denied any business ties with Huawei. It provided Taiwan Semiconductor with a detailed report to affirm its non-involvement with Huawei.

TechInsights found the Taiwan Semiconductor-made chip when dismantling Huawei’s multi-chip processor.

Taiwan Semiconductor, which has not supplied chips directly to Huawei since mid-September 2020, informed the U.S. Department of Commerce of its findings but stated it is not currently under investigation.

Huawei also stated that it has not manufactured chips with Taiwan Semiconductor since the U.S. tightened export rules in 2020.

Taiwan Semiconductor is the key supplier of Apple Inc AAPL and Nvidia Corp NVDA, producing 99% of the world’s AI accelerators, Bloomberg reports. The Taiwanese contract chipmaker gained over 136% in the last 12 months.

Despite these gains, Taiwan Semiconductor still needs to improve in making advanced AI semiconductors for China as the U.S. collaborates with allies like Japan and the Netherlands to restrict China’s access to leading-edge chips.

China, however, still accounts for over 10% of Taiwan Semiconductor’s revenue, as per Bloomberg. Before 2020, when Huawei was a key customer, Taiwan Semiconductor even relied on China for about 20% of its sales.

Morris Chang, co-founder of Taiwan Semiconductor, expressed confidence on Sunday that the contract chipmaker would keep achieving remarkable successes in the semiconductor industry under its current leadership, the Print cites the Taipei Times.

During Taiwan Semiconductor’s annual Sports Day event, Chang remarked that trade globalization has “died” due to rising geopolitical tensions, which he sees as a challenge to the company’s role in the global supply chain.

Price Action: TSM stock is down 2.01% at $199.35 premarket at last check Monday.

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