TSMC to Make Chips for Cryptominer Bitdeer at New US Fab
[Exclusive] Technically, it's not breaking the law. But TSMC may be courting trouble if it keeps sailing so close to the wind
Good Morning from Taipei,
TSMC is set to begin production of chips for Bitcoin chip mining company Bitdeer in Arizona this quarter, according to my sources.
Six months after planning, then pulling, production of chips for fellow Chinese crypto mining company Bitmain in Arizona, the Taiwanese company is pushing ahead with manufacturing chips for a different China-connected high-performance computing client at a US federally funded facility.
What’s ironic about this development is that it comes literally the same week that the US Department of Commerce added Sophgo to its Entity List. Late last year, TSMC was caught producing chips for Huawei, which is forbidden by the US government, with Sophgo as the cutout.
An August report by the Taipei-based Research Institute for Democracy, Society, and Emerging Technology (DSET) showed the connection between Bitmain, Sophgo, and Huawei. This connection is crucial to TSMC because it was the act of making chips for Sophgo which tied its fabs to Huawei products.
As a result, the US added Sophgo and affiliates to the Entity List this week.
“Bitdeer, originally a division of Bitmain, later split off to expand into the US market. Notably, it is still led by one of Bitmain's key founders,” said Chiang Min-yen, a non-resident fellow at DSET. “This reflects a recurring pattern in Bitmain and Sophgo's history, where business divisions are used to bypass regulations.”
Chiang is the one who dug up the connection between Bitmain, Sophgo and Huawei and authored that report.
Bitdeer is led by Bitmain founder Wu Jihan, after he left the latter following a dispute with co-founder Micree Zhan. He started over with Bitdeer. On paper, Bitdeer is registered as a Singapore-based company, but there’s plenty of evidence to suggest it’s probably still Chinese, including the fact that most of the lawyers on its SPAC deal work out of their respective company’s China practices, not Singapore.
Bitdeer describes its founding as being a spinoff from Bitmain, with major shareholders in Bitdeer being former executives of Bitmain. One key investor in Bitdeer for example, is Shinning Stone Invest Co., the investment vehicle for Zhao Zhaofeng who was a founder of Bitmain. Bitdeer has leant into its connection to Bitmain, including a statement from Bitdeer itself noting that Wu was previously at Bitmain.
“While it is unclear whether Bitdeer has engaged in similar practices or violated export controls, its close ties to Bitmain raise significant red flags,” Chiang, the author of the DSET report on Sophgo, said. “Any business collaboration with Bitdeer warrants careful scrutiny to mitigate potential risks.”
By my understanding, there was a point when Bitmain was one of TSMC’s biggest clients, and a major buyer of leading-edge wafers. One reason, according to company insiders, could be due to crypto miners buying wafers regardless of yield, which makes (or made) them valuable cash cows.
One of my concerns is whether it’s still too much of a risk for TSMC to engage with companies like Bitmain and Bitdeer, even if these companies try to delineate between AI and cryptocurrency. My question is simple: Are these companies so important to TSMC that they’d even take that risk?
TSMC reported fourth quarter earnings Thursday afternoon, and CEO CC Wei addressed this issue.
In short, TSMC understands that the US government is most concerned about supply of AI chips to places like China, but is less worried about other types such as automotive and consumer electronics. Knowing this difference, TSMC can advocate for its clients to get approval for the innocuous stuff while having the technical competence to know the difference between an AI chip and a crypto mining chip.
I believe him. But then again, the company was caught making chips for a Huawei cutout and the full impact of that mistake has yet to hit. And after I published news that TSMC was ready to make Bitmain chips in Arizona — before that plan was ditched — multiple people came to me with the same reaction, summarized as: “wtf, are you kidding me?”
TSMC neither confirmed or denied the Bitdeer plans. The company’s official comment to my questions about this is as follows:
TSMC is a law-abiding company and we are committed to complying with all applicable rules and regulations, including applicable export controls. We maintain a robust and comprehensive export system for monitoring and ensuring compliance. If we have any reason to believe there are potential issues, we will take prompt action to ensure compliance, including conducting investigations and proactively communicating with relevant parties, including the US Department of Commerce.
The saving grace for TSMC is that there’s currently no clear connection between Bitdeer and Huawei, or any banned Chinese entity. And one of the reasons Wu left Bitmain is because he disagreed with the company’s move into AI: Wu wanted to stick with crypto mining.
These two facts give TSMC plausible deniability about straying into prohibited territory. And it deserves the benefit of the doubt, for now. But, as I’ve stated many times before, TSMC is sailing into unchartered and stormy geopolitical waters. Its days of political neutrality are over, and the US government will surely remind them of this fact.
Thanks for reading.