Huawei chips found with TSMC's shadow, can TSMC (2330) continue to hit new historical highs?

A technology research firm discovered a TSMC chip in Huawei's artificial intelligence chip products, which may potentially violate US export restrictions, drawing attention from the US Department of Commerce and the Taiwanese government. However, TSMC's stock price only experienced a slight pullback due to the news and international market fluctuations after reaching a historical high of NT$1,100 last week.

Did TSMC's shadow appear in Huawei chips?

According to a report by Reuters, after the technology research company TechInsights disassembled Huawei's Ascend 910B AI chip product, they found a chip from TSMC in the product. This chip is a processor for training large language models, which may violate U.S. export restrictions.

For national security purposes, the U.S. placed Huawei on a trade restriction list in 2019. TSMC stated in a press release on Monday that it maintains a strong and comprehensive export control system to monitor and ensure compliance. Since mid-September 2020, the company has ceased supplying chips to Huawei and has proactively contacted the U.S. Department of Commerce. The Taiwanese government has also stated that strict rules have been put in place to prevent the production of advanced chips in China to ensure that Taiwanese tech companies comply with U.S. regulations. Taiwan's Minister of Economic Affairs, Wang Mei-hua, stated to reporters in Taipei on Wednesday that there will be full communication with TSMC.

Huawei, headquartered in Shenzhen, also stated that since the implementation of U.S. regulations in 2020, the company has not produced any chips through TSMC.

U.S. Considers Huawei a National Security Threat

The U.S. has long viewed Huawei as a multifaceted threat to its national security, technology, intellectual property, and espionage activities. Huawei's CFO, Meng Wanzhou, was arrested at Vancouver Airport in Canada in December 2018. The U.S. accused her of violating sanctions against Iran and defrauding HSBC Bank, sparking diplomatic tensions between China and the U.S.

The U.S. has implemented several restrictions on Huawei, including:

• Entity List: Since 2019, Huawei and several of its subsidiaries have been placed on the U.S. Department of Commerce's Entity List, requiring U.S. companies to obtain licenses to export technology and components to Huawei.
• Export Restrictions: In 2020, the U.S. further strengthened export restrictions on Huawei, requiring global semiconductor products made with U.S. technology or software to obtain U.S. government approval when exported to Huawei.
• Supply Chain Blockade: The U.S. has prevented Huawei from accessing advanced chip manufacturing tools and requires semiconductor manufacturers to obtain licenses when supplying Huawei, aiming to prevent Huawei from obtaining U.S. chips through third parties.

These restrictions have had a significant impact on Huawei's supply chain and technological development. However, Huawei's products have recently made significant advancements. In September, Huawei released the world's first three-fold screen phone, Mate XT, which claims to fit a tablet in your pocket. The announced price ranges from 19,999-23,999 RMB, approximately 90,400-108,500 TWD, making it the most expensive "king of phones" in history.

Apple iPhone 16 vs. Huawei Mate XT, the imminent showdown between Chinese and American smartphones

How is TSMC's Stock Performing?

After delivering impressive results at last week's earnings conference, TSMC's stock skyrocketed to a historic high of 1,100 TWD, with foreign investors raising their target price for TSMC, with the highest reaching 1,600 TWD. Although there was a slight pullback in the past two days due to news and international stock market declines, the stock has risen nearly 80% year-to-date.