TSMC, the leading contract chip manufacturer globally, has announced that it cannot guarantee its chips won’t end up in China. In its recent annual report, the company detailed the difficulties associated with maintaining control over the compliance of its clients. This revelation comes months after intermediaries reportedly delivered TSMC’s artificial intelligence (AI) chips to China’s Huawei. The Taiwanese tech giant admitted it lacks complete oversight of the end-users of its silicon products.

This acknowledgment raises concerns about the potential for more of TSMC’s chips to fall into the hands of Chinese companies. The firm noted its “limits” in fully understanding the clients to whom it exports its products, implying that incidents similar to the one involving Huawei could occur in the future. In its annual report, TSMC stated, “TSMC’s role in the semiconductor supply chain inherently limits its visibility and information available to it regarding the downstream use or the user of final products that incorporate semiconductors manufactured by it.” The scrutiny on TSMC escalated after reports indicated that its chips were found in Huawei’s AI products, though TSMC clarified that these exports occurred before the imposition of US sanctions.

The situation has highlighted several vulnerabilities and challenges within the semiconductor supply chain. Meanwhile, the US government continues to impose restrictions on China’s access to advanced technologies, a trend initiated during the Trump administration and followed under President Biden. Recently, new regulations targeting AI chips were introduced, and US officials urged chip manufacturers, including TSMC and Samsung, to enhance their vetting processes, especially concerning clients in China. Additionally, the administration banned 16 Chinese companies, including SOPHGO Technologies, for allegedly assisting Huawei in acquiring TSMC’s semiconductors.