A new report from the Center for Strategic and International Studies (CSIS) claims that Huawei used shell companies to secretly obtain millions of AI chips manufactured by TSMC, violating U.S. export controls. Despite being blacklisted in 2020, Huawei allegedly secured over 2 million Ascend 910B AI chips through intermediaries, potentially enabling the production of 1 million Ascend 910C chips.

TSMC's Involvement and Huawei's Stockpiling Strategy

CSIS states that TSMC unknowingly produced and shipped Ascend 910B logic dies to shell companies working for Huawei. If accurate, this supply could sustain Huawei's AI ambitions for years. Additionally, Huawei reportedly stockpiled high-bandwidth memory (HBM) before U.S. restrictions on advanced memory sales to China took effect in December 2024.

According to industry sources, Huawei acquired most of its HBM from Samsung through intermediaries before the ban, securing enough supply to sustain chip production for at least a year. The report warns that Huawei may continue using similar tactics to source chips from Samsung or even Intel through indirect channels.

The Evolution of Huawei's AI Chips

Huawei's Ascend 910 series has undergone multiple iterations to bypass U.S. restrictions:

● Ascend 910 (2019): Originally made by TSMC on its 7nm+ EUV process, this version was blocked after Huawei's Entity List designation in 2020.

● Ascend 910B: Redesigned to be manufactured by SMIC using its N+1 (7nm-class) process.

● Ascend 910C: A further evolution produced on SMIC's N+2 (2nd-gen 7nm) process, featuring a single compute chiplet.

While CSIS alleges that TSMC helped manufacture Ascend 910C components, experts argue that the newer Huawei chips rely entirely on SMIC's fabrication technology, with no direct connection to TSMC.

Production Challenges and Performance Concerns

Despite its supply chain maneuvers, Huawei faces significant yield and packaging issues:

● SMIC's 7nm yields remain low (around 20%), limiting production volume.

● Advanced packaging defects affect up to 25% of chips, reducing overall efficiency.

Even with these challenges, Huawei continues mass-producing Ascend 910B and 910C chips for both internal AI projects and external customers. For example, DeepSeek claims that Ascend 910C achieves 60% of Nvidia H100's performance, making it viable for AI inference tasks but not ideal for training large-scale AI models.

U.S.-China AI Race: A Shrinking Gap

The CSIS report warns that despite U.S. sanctions, China's AI capabilities are rapidly catching up. Without further restrictions, Chinese firms might soon surpass American rivals in cutting-edge AI model development. Huawei's strategic efforts—state-backed investments, chip smuggling, foreign talent recruitment, and reverse engineering—are all part of China's broader push to overcome technological barriers.

While U.S. companies still lead the AI race, CSIS cautions that this lead may now be less than two years—a significantly narrower gap than before.