Sophgo, a Chinese tech company specializing in RISC-V and TPU processors, is set to be added to the U.S. Department of Commerce's Entity List due to its role as an intermediary facilitating Huawei's access to TSMC's semiconductor manufacturing capacity, reports Reuters. This move will effectively block Sophgo from sourcing advanced chips and could spell the end of its operations.

Since September 2020, Huawei has been prohibited from legally purchasing chips that rely on American technology, meaning virtually all high-performance semiconductors. Sophgo's violation of U.S. export controls, in which it placed an order for Huawei-designed chips with Taiwan's TSMC, prompted the U.S. to target the company. The U.S. government's investigation into this has resulted in Sophgo being added to the Bureau of Industry and Security's Entity List, a move that places stringent export restrictions on the company.

This decision comes after a 2023 investigation by TechInsights, which uncovered that Huawei's Ascend 910 processor—designed for artificial intelligence applications—was using chiplets sourced through Sophgo from TSMC. Following the confirmation, TSMC halted shipments to Sophgo and alerted both U.S. and Taiwanese authorities. The U.S. Commerce Department's sanction further limits Sophgo's ability to operate, as it will no longer be able to procure chips outside of China or purchase U.S.-made semiconductor design tools (EDA tools).

Despite denying any direct or indirect dealings with Huawei, Sophgo's ties to Bitmain, a major supplier of cryptocurrency mining hardware, have raised further questions. Bitmain's co-founder, Micree Zhan, is a key investor in Sophgo, holding a significant stake through an investment company. While Bitmain has distanced itself from the controversy, using a Bitmain email address in communication with the U.S. Federal Communications Commission has raised suspicions of deeper links between the two companies.

The addition of Sophgo to the Entity List follows broader U.S. efforts to curtail China's access to cutting-edge technology, particularly semiconductors. However, this case also highlights a broader trend in which Chinese companies, including Huawei, have used intermediaries to bypass export restrictions and secure advanced chips from international manufacturers. The growing scrutiny of such activities may signal a shift in global chip supply chains and an intensifying technological cold war between the U.S. and China.

For Sophgo, the consequences of this move are clear: it will no longer be able to operate as an intermediary for Huawei or other companies seeking to procure chips from TSMC, marking a significant setback in its business model. As for Huawei, the company will likely seek other avenues to acquire the chips it needs, though the prospects of finding viable alternatives remain uncertain.