How TSMC’s Huawei mistake may cost it $1 billion fine in the US

Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, is under investigation by the US Department of Commerce for allegedly violating export control regulations. The probe centers on a chip manufactured by TSMC for Sophgo, a China-based chip design company, which reportedly ended up in Huawei’s high-end Ascend 910B artificial intelligence processor. Huawei has been on the US Entity List since 2020, restricting its access to goods made with US technology.
According to a report by Reuters, TSMC could face a fine exceeding $1 billion if found guilty of breaching export rules. The penalty is based on regulations allowing fines up to twice the value of unauthorised transactions. TSMC’s manufacturing process involves US-origin technology, making its Taiwan-based factories subject to US export controls. These controls prohibit the production of chips for Huawei or certain advanced chips for Chinese customers without a US license.
The investigation highlights the risks of diversion, as TSMC reportedly produced nearly three million chips for Sophgo, which were later linked to Huawei’s AI processor. Experts suggest that the chip’s AI-focused design should have raised red flags, given the potential for misuse by restricted entities like Huawei.
TSMC has denied supplying chips to Huawei since September 2020 and stated that it is cooperating with the Commerce Department. The company has also suspended shipments to Sophgo following the discovery of the issue. A spokesperson for TSMC reaffirmed the company’s commitment to compliance with export regulations.
This case comes at a critical time for U.S.-Taiwan relations, as trade negotiations are underway. TSMC recently announced plans to invest $100 billion in the US, including the construction of five new semiconductor fabrication plants.