On October 11, TSMC discovered that chips produced for a specific customer ended up with Huawei, potentially violating U.S. sanctions. In response, TSMC immediately halted shipments to the customer and proactively notified both U.S. and Taiwanese authorities.
Min-Yen Chiang, a Non-Resident Fellow at the Research Institute for Democracy, Society, and Emerging Technology (DSET), stated in interviews with AFP and Business Insider that external parties lack sufficient information to understand which companies are actually under Huawei’s influence. This has raised concerns about the opacity surrounding Huawei’s “shadow network,” including how big the web is and the nature of the network. The “shadow network” refers to an opaque or informal supply chain system that may involve indirect channels or third-party companies to bypass U.S. export restrictions and acquire advanced chips or technology.
Since the U.S. imposed sanctions on Huawei in 2019, the company has faced restrictions on accessing American technology and semiconductors. In 2020, these sanctions were further expanded, prohibiting chip manufacturers, including TSMC, from supplying Huawei without U.S. government approval. However, the incident involving Huawei obtaining TSMC chips has cast doubt on supply chain transparency, particularly whether Huawei is using a “shadow network” to evade the sanctions.
Chiang remarked, “Public information suggests that TSMC has been closely following export controls, but Huawei’s network needs to be better understood to improve due diligence.” He also warned, “If it remains unclear, what happened with TSMC could happen to other chip manufacturers as they wouldn’t know if the chips that they sell would be resold to Huawei”
John Moolenaar, Chairman of the U.S. House Select Committee on the Strategic Competition Between the U.S. and the Chinese Communist Party, stated that the incident represents a “catastrophic failure” of U.S. export control policy and called on the government to take immediate action to prevent such occurrences in the future.
DSET will continue to monitor whether the U.S. will strengthen regulatory reviews and export controls, as well as the potential implications for geopolitics and the supply chain.