Huawei is blocked, but Xiaomi can find TSMC

Why Has Huawei Been Restricted?

Huawei was first placed on the Entity List by the U.S. Department of Commerce on May 15, 2019. This list means that exporting American technology to this company requires a license, and that license can also be rejected.

The real roadblock was the rules upgrade on May 15, 2020. The U.S. Department of Commerce explicitly stated that it would restrict Huawei’s ability to use American technology and software overseas for chip design and manufacturing, effectively sealing off the path of “finding an overseas foundry to bypass it.” TSMC made this even clearer in its 2020 annual report: to ensure compliance, they stopped shipping to Huawei starting from September 15, 2020.

Therefore, Huawei is not merely restricted from “buying chips,” but is bottlenecked across the entire value chain encompassing design, manufacturing, contract fabrication, equipment, and software. You can understand it this way: for Huawei, the problem isn’t simply finding a factory, but whether that factory dares to accept the work, and if doing so would violate American regulations.

Why Xiaomi Still Can Work with TSMC

Xiaomi and Huawei do not have the same treatment. Xiaomi has not been placed on the Commerce Department’s Entity List, so it is not in the situation where “any contract taken by the factory could potentially violate restrictions,” like Huawei.

Many people mistakenly equate Xiaomi and Huawei regarding events in 2021, but this is inaccurate. Back then, Xiaomi was listed once by the U.S. Department of Defense as a “Chinese military company,” but that restriction applied to investments made by U.S. persons. The court issued a preliminary injunction in March 2021, and the U.S. officially lifted this securities restriction on May 25, 2021. It was not an export embargo like Huawei faced, nor was it a comprehensive ban on chip foundry services.

More importantly, in recent years, the US has become increasingly targeted. Its restrictions are not aimed at all Chinese consumer electronics, but specifically at high-end AI chips, supercomputing, and related equipment. When updating the rules on October 17, 2023, BIS stated it very clearly: the focus is on advanced computing semiconductors, semiconductor manufacturing equipment, and supercomputing items, with the core objective being military AI capabilities and the risks associated with military-civil fusion.

This explains why Xiaomi’s XRING O1 can still utilize TSMC. It is a consumer electronics chip, not a highly restricted AI training chip like Huawei’s. As long as the customer has not been blacklisted and the chip specifications do not cross regulatory red lines, TSMC still maintains compliance scope.

Who Else Seeks TSMC Foundry Services

Yes, and quite a few. Public reports already mentioned in 2024 included Chinese AI chip companies such as MetaX and Enflame, which had to downgrade their designs before resubmitting them merely to secure TSMC capacity. This detail speaks volumes: the US is not restricting whether “Chinese products can use overseas foundries,” but rather ensuring that “high-end AI chips cannot easily bypass (these restrictions).”

In other words, what is truly being heavily restricted is the AI chip line, not all Chinese companies or all Chinese products. Consumer-grade SoCs might still have some room, but high-end AI accelerators and training chips are becoming increasingly difficult to obtain.

How Was Huawei’s AI Chip Discovered?

The link/chain this time has been exposed not because of a public admission from Huawei, but through a device teardown.

In October 2024, Reuters reported that TechInsights disassembled a Huawei product and found a chip that appeared to be manufactured by TSMC; subsequently, TSMC also notified the US side. Immediately after, Reuters further reported that TSMC stopped shipping to Sophgo, a Chinese chip design company, because it found its fabricated chips in Huawei’s AI processor.

The product corresponding to this line is Huawei Ascend 910B. In other words, what the outside world is building/assembling is not a phone chip, but rather Huawei’s AI processor. The reason it is problematic is not merely because of “which foundry was used,” but because it falls into one of the most sensitive categories of chips in the United States.

My Own Assessment

Upon prolonged observation, it becomes clear that America’s strategy is not about generalized efforts but rather a progressively targeted approach. Huawei serves as the benchmark; AI chips are the main battleground, while foundries are merely an execution component.

Xiaomi being able to use TSMC does not mean that US restrictions on China’s chips have eased; it just means they haven’t crossed the next, narrower, and harder threshold. Huawei’s difficulties are not because “Huawei is bigger,” but because it has been placed squarely in the crosshairs of export controls—it cannot circumvent them.

References

Writing Notes

Original Prompt

Please query relevant government documents and explain why TSMC cannot manufacture Huawei’s chips. Regarding Xiaomi’s “Xuanjie” chip, if TSMC can manufacture it, wasn’t Xiaomi sanctioned by the US? Besides Xiaomi, are there any other domestic companies using TSMC for manufacturing? The focus now seems to be heavily on locking down AI chips. Could you detail the specifics of Huawei’s AI chip outsourcing/manufacturing: how was this discovery made, and what specific product is involved?

Summary of Writing Ideas

This piece focuses on the rule differences between “why Huawei is blocked vs. why Xiaomi can still operate.”
The section on Huawei integrates historical timelines: listing names in 2019, and adding the foundry chain in 2020.
The section on Xiaomi clarifies separately: it encountered investment restrictions, but not a Huawei-style export ban.
The article deliberately avoids developing into a comprehensive overview of the US-China tech war, only retaining parts directly related to TSMC’s foundry services.
Huawei’s AI chip discovery process is structured as a single line following “teardown - tracing - foundry chain.”
The conclusion returns to a practical judgment: what is currently targeted are high-end AI chips, not all Chinese chips.