TSMC could be fined $1 billion over chip shipments to Huawei

TSMC, the world’s largest contract chipmaker, could face a massive fine of $1 billion or more as part of a U.S. Commerce Department investigation into a chip TSMC made for a Chinese company that was found in Huawei’s Ascend 910B AI accelerator.

Image Source: TSMC

According to Reuters, the investigation concerns TSMC’s cooperation with the Chinese company Sophgo. A chip developed for it, manufactured at TSMC facilities, turned out to be identical to a component found in the Huawei Ascend 910B accelerator, one of the most advanced AI chips made in China and a popular alternative to the sanctioned Nvidia H100 chip.

Huawei has been on the US blacklist since 2019, prohibiting it from receiving products made with US technology. Because TSMC’s equipment includes US components, the company is subject to US export restrictions, including a ban on supplying advanced chips to Chinese customers without a special license.

«”TSMC should not have been making such chips for a Chinese company, especially given the risk of them being sold to Huawei,” said Lennart Heim, a researcher at the RAND Corporation. He estimates that about three million of the chips were made.

The potential fine could exceed $1 billion and is based on export regulations that allow for fines of up to twice the value of alleged transactions that violate U.S. export laws. Although no formal charges have been filed, the Commerce Department typically issues a notice in such cases outlining the penalty formula and giving the company 30 days to respond.

TSMC spokesperson Nina Kao said the company strictly complies with the law and has not supplied Huawei products since September 2020. She also said TSMC is actively cooperating with the US regulator in the ongoing investigation.

The news had a negative impact on the company’s stock market, with its shares trading down from nearly 3% gains. This also came amid worsening trade tensions between the US and Taiwan, especially after the recent imposition of a 32% tariff on a range of imported goods by the Donald Trump administration.

The situation is further complicated by the fact that in March, TSMC announced its intention to invest $100 billion in expanding semiconductor production in the United States, including building five new factories. Washington, in turn, has tightened controls on the export of advanced technologies to China, including through tougher fines, as senior officials have previously stated. If TSMC is found to have violated the law, the financial penalty will be one of the largest in the history of U.S. export controls.