Key components produced by a leading Taiwanese manufacturer were found in a powerful AI chip from a Chinese company, according to a preliminary report from a semiconductor research firm, which experts say could violate US export controls.
American officials have been briefed on the study, according to a source familiar with the matter who asked not to be named to discuss confidential matters. The study describes the classification of the AI chip produced by the Chinese company Enflame. After it took apart the Enflame processor, research firm TechInsights said on its website, it discovered that key components of the chip were manufactured by Taiwan Semiconductor Manufacturing Co. (TSMC).
In the past few years, the US has placed strict restrictions on which AI-related products can be sold to Chinese companies or companies operating in China, a move aimed at maintaining America’s lead in AI development. The chips provide the computing power needed to create and run AI systems, and their limited supply has acted as a bottleneck in China’s AI industry.
Trade rules, established by the Commerce Department, determine where and how a chip can be shipped based on such metrics as the number of computer calculations it can perform per second and its computing power relative to its size.
The Enflame S60 chip could be powerful enough to be under those export restrictions, TechInsights seemed to conclude, based on its preliminary analysis. Export control arrangements may make chip sales to Chinese AI companies legal from late 2022 onwards, experts say. According to several Chinese newspapers, at least one of which is affiliated with the state, the Enflame S60 chips will be produced in 2024.
TechInsights says it categorizes export control information, also called ECCNs, based on information from manufacturers or third-party suppliers or “on information obtained during analysis.” In this disclaimer, TechInsights notes that the findings and conclusions are not final regulatory decisions.
Shortly after NBC News sent its request for comment to TechInsights, the publicly visible classification was changed to “TBD” before being removed from the website entirely.
“Technical analysis of the Enflame S60 is ongoing and incomplete,” TechInsights spokesperson Graham Butler said in response to a request for comment. “We will place the ECCN provisionally based on the receipt of the initial report. This may change as the reports are finalized.” TechInsights declined to provide a full report to NBC News. TSMC told NBC News that the classification used by TechInsights was incorrect.
Starting in 2022, the US has asserted that its export controls apply to “certain AI-related items made using US technology, software, or equipment” destined for China, even if the items themselves are made outside the US. That determination includes all AI chips, given that American technology is used in the machines that make the chips.
Under US export rules, which have been expanded to apply to chips destined for countries outside of China to address smuggling fears, TSMC is barred from exporting high-end chips designed for AI purposes to Chinese companies without specific export licenses.
TSMC builds most of the world’s AI chips thanks to its expertise in the unique and complex manufacturing techniques required to create semiconductor-dense chips.
“We have reviewed a third-party analysis report that states that a particular chip produced by TSMC is considered an AI-controlled chip,” a TSMC spokesperson wrote in response to a request for comment on the new study about the Enflame S60.
“Based on its technical characteristics and applications, this chip does not meet the criteria to be classified as a controlled AI chip and the report has been corrected, and the false claim has been removed. TSMC is a law-abiding company, and we are committed to complying with all applicable laws and regulations, including applicable export controls.”
Asked about TSMC’s claim that TechInsights’ classification of the Enflame chip was flawed, a TechInsights spokesperson simply insisted that the technical analysis was “ongoing and incomplete.”
Enflame did not respond to requests for comment.
TSMC has previously been accused of violating export controls related to the production of chips found in AI processors from China’s leading technology company Huawei, according to Reuters.
In April, Reuters reported that the Commerce Department opened an investigation into TSMC about how its chips are made at a company called Sophgo that is included in Huawei’s processors, which was already banned by export controls from receiving AI chips made by TSMC, and said that TSMC could face a fine of $1 billion or more. At that time, a spokesperson for TSMC said that the company is determined to comply with the law and is cooperating with the Department of Commerce.
When asked about the existence and status of the Huawei investigation, Commerce Department spokeswoman Lauren Weber Holley wrote in an email: “The Commerce Department does not comment on law enforcement matters or confirm or deny the existence of any pending investigation.”
Asked about any possible investigation into the Enflame chip, Holley wrote: “The Commerce Department does not comment on enforcement matters or confirm or deny the existence of any pending investigation.”
The measures introduced in November 2023 also limited the types of chips and countries to which semiconductor companies using American technology can export chips designed for AI purposes. The Enflame S60 chip, produced by TSMC, is powerful enough to make it under these strict regulations, according to details previously viewed on the TechInsight website.
Jacob Feldgoise, a senior data analyst at Georgetown University’s Center for Security and Emerging Technology who had access to separate data about the chip, said he was inclined to trust TechInsights’ initial determination that the chip was powerful enough to be subject to the regulations.
Due to intense global AI competition and fears that Chinese companies may transfer advanced chips to the Chinese military, the Commerce Department rarely grants such licenses. According to a senior official of the Department of Commerce, Enflame did not receive a license in 2023, 2024, or 2025.
“If this is a large AI chip designed for data center use and produced at TSMC, that may be a violation of export controls similar to the Huawei-Sophgo incident,” said Lennart Heim, a leading semiconductor expert, clarifying that he had not seen the chip and would need more information to reach a firm conclusion. The Commerce Department has not commented on the existence or status of an investigation related to Huawei or confirmed that the incident was an export control violation.
“Enflame is basically an AI chip designer for Tencent. It’s not a random independent startup — it’s deeply connected to one of China’s biggest tech companies,” Heim told NBC News in written comments. “This is probably a much smaller incident than Huawei-Sophgo in terms of how many chips were produced – but it shows a pattern of chips going through TSMC that they shouldn’t have.”
According to reports from Chinese newspapers, Enflame has installed tens of thousands of S60 chips in data centers and similar infrastructure. it is essential to the development and use of AI.
In recent months, the Trump administration has approved the sale of chips with capabilities that far exceed the performance of the Enflame S60 chip to China. However, the State Department has reportedly delayed the approval process as it seeks stricter rules on how chips, such as the Nvidia H200 series, are used with national security in mind.
