House Select Committee on China Chairman John Moolenaar (R-Mich.) is pressing the Commerce Department to confirm that chip manufacturers must continue checking advanced-chip orders to prevent them from reaching restricted Chinese companies.
In an Aug. 6 letter to Jeffrey Kessler, who oversees the department’s Bureau of Industry and Security (BIS), Moolenaar said Sophgo placed roughly $500 million worth of wafer orders with TSMC in its own name and then diverted the resulting chips to Huawei.
A wafer is the round slice of silicon on which many chips are manufactured at once. The wafers may have yielded millions of advanced chips, according to an estimate by semiconductor research publication SemiAnalysis cited in the letter.
Moolenaar said the safeguard adopted after the Sophgo case was thrown into doubt when the Trump administration stopped enforcing a broader Biden-era regulation governing the global distribution of advanced AI technology.
“BIS should clarify that the Foundry Due Diligence Rule remains in effect,” he wrote.
TSMC-Made Chip Found in Huawei Processor
The discovery came four years after the United States expanded restrictions intended to prevent Huawei from receiving foreign produced chips made with certain U.S. technology without a license.
TSMC said in its 2022 annual report that it stopped shipping products to Huawei on Sept. 15, 2020, to comply with applicable laws and regulations.
Moolenaar described Sophgo as a Huawei “front company.”
Publicly available records do not establish how the chips moved from Sophgo to Huawei, and Commerce has not accused TSMC of knowingly supplying Huawei.
The Sophgo orders predated the Foundry Due Diligence Rule. Moolenaar presented the case as the type of diversion the later safeguards were intended to prevent.
In January 2025, BIS placed Sophgo and several affiliated companies on its Entity List. The agency said the companies had acted at Beijing’s direction to advance China’s production of advanced chips.
The Foundry Due Diligence Rule took effect on Jan. 16, 2025, with compliance required beginning Jan. 31.
It requires manufacturers to obtain a U.S. license before making certain advanced chips for customers that have not passed U.S. verification checks. The requirements are meant to prevent companies from concealing a chip’s capabilities or ordering it for a restricted buyer.
US Regulatory Changes
The foundry safeguards were linked to the Biden administration’s AI Diffusion Rule, a much broader regulation governing how advanced chips and some AI models could be distributed around the world.
In May 2025, the Trump administration announced that it would rescind the AI Diffusion Rule.
Commerce said the regulation would have imposed burdensome requirements on U.S. companies, hindered American innovation, and damaged relations with dozens of countries.
BIS instructed its enforcement officials not to enforce the rule’s new requirements and said it would issue a replacement.
Moolenaar’s letter did not call for restoring the broader rule. It focused on what the non-enforcement decision meant for the separate foundry safeguards, which rely on licensing provisions contained in that regulation.
He said BIS’s announcement left companies uncertain about whether those safeguards remained legally binding.
According to the letter, TSMC and many other semiconductor companies appeared to be continuing the additional checks. Moolenaar did not identify any company that had stopped following them.
He warned, however, that a manufacturer could interpret BIS’s announcement to mean that the worldwide licensing requirement no longer applied. That “would dramatically increase the risk of another Sophgo-like export control failure,” he wrote.
Moolenaar Seeks Clear Answer
BIS issued guidance on May 31 stating that export-license requirements remain in force for certain advanced chips supplied to companies based or ultimately owned in China, Macau, and other restricted destinations.
Moolenaar said the guidance did not address orders placed with foundries by chip designers that have not passed U.S. verification checks.
He asked BIS to take one of two steps: issue immediate guidance stating that the Foundry Due Diligence Rule remains in effect, or formally separate the foundry safeguards from the rejected AI Diffusion framework.
BIS and TSMC did not respond to The Epoch Times’s requests for comment by publication time. Moolenaar asked BIS to brief committee staff by Aug. 31 on its interpretation of the rule and any investigations into possible chip diversion caused by failures to follow the safeguards.
