Romania's Halep took advantage of an error-strewn display from the defending champion to make it two wins out of two in the Red Group, coasting to a 6-0 6-2 victory in just 65 minutes.
An out-of-sorts Williams was made to pay for 36 unforced errors and seven double faults as Halep beat a player ranked in the top three in the world for the first time at the ninth attempt.
Eighteen-time grand-slam winner Williams allowed her frustration to get the better of her as the ruthless Halep took a giant stride towards the semi-finals in her first appearance in the season-ending event.
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