A TSMC logo is visible in Tainan, Taiwan, on December 29, 2022, captured in a file photo by Reuters’ Ann Wang.
Taiwan’s leading chipmaker, TSMC, may be hit with a fine of over $1 billion after a U.S. investigation revealed one of its chips ended up inside a Huawei AI processor, according to sources familiar with the case.
The U.S. Department of Commerce has been looking into TSMC’s business dealings with a Chinese company named Sophgo. Investigators say a chip designed for Sophgo and made by TSMC closely resembles the one found in Huawei’s advanced AI processor, the Ascend 910B. The concern is that the chip, originally made for Sophgo, might have reached Huawei—an entity blacklisted by the U.S. government.
Huawei is at the heart of China’s ambitions to develop powerful AI chips. But for years, it has faced tough trade restrictions from Washington, which accused the tech giant of dodging sanctions and stealing trade secrets. The U.S. forbids companies from selling or supplying Huawei with products made using American technology unless they obtain special permission.
Lennart Heim, a researcher at the RAND Corporation, claims nearly 3 million chips made by TSMC for Sophgo may have eventually been used by Huawei. U.S. export control laws allow penalties of up to double the value of the transactions, which is how the possible fine could surpass $1 billion.
TSMC’s factories in Taiwan use American equipment, making the company subject to U.S. export rules. These rules prohibit TSMC from producing certain advanced chips for Huawei or other Chinese clients unless it has a U.S. license. Heim argues that even the design of the chip should’ve been a red flag, as it was clearly meant for AI—a field tightly monitored under export laws.
News of the potential fine shook investor confidence. TSMC’s U.S.-listed shares dropped after initially gaining almost 3%.
This development couldn’t have come at a more sensitive time. The U.S. and Taiwan are currently renegotiating trade terms. Just last week, former President Trump imposed a steep 32% tariff on products from Taiwan, excluding semiconductors for now—but he hinted that chips might be next.
In March, TSMC had announced a massive $100 billion plan to expand operations in the U.S., including building five new chip factories. Despite this, the company’s troubles with U.S. regulators have cast a cloud over its American future.
While no official penalty has been announced yet, sources say the Commerce Department could soon issue a formal notice to TSMC, outlining the violations and the proposed fine. This “charging letter” would give TSMC 30 days to respond.
Neither TSMC nor the U.S. Commerce Department has confirmed the penalty. TSMC stated it hasn’t done business with Huawei since September 2020 and is working with U.S. authorities. Taiwan’s economy minister said he had not received any official word on a possible fine and declined to comment further.
This probe reflects Washington’s growing efforts to enforce export laws more strictly. At a recent conference, Commerce Secretary Howard Lutnick declared a push for tougher penalties on companies helping U.S. adversaries. Another top official, Jeffrey Kessler, said that the TSMC-Huawei issue was a serious concern that required strong enforcement.
Large fines for export control breaches are uncommon. The last major one came in 2023 when Seagate Technology was penalized $300 million for shipping over $1 billion worth of hard drives to Huawei.
TSMC’s troubles began late last year when Canadian research firm Tech Insights took apart Huawei’s 910B AI chip and discovered a TSMC-made component. Following that, TSMC halted its shipments to Sophgo. In November, U.S. regulators also ordered the company to stop selling high-end AI chips to China.
By January, Sophgo found itself on the same restricted list as Huawei. Though the company denied links to Huawei in the past, it could not be reached for comment this time.
Huawei’s Ascend 910B is currently seen as the most advanced AI chip produced by a Chinese firm. With increasing pressure on American companies to cut ties with Huawei, TSMC now faces both regulatory heat and trade tension as it tries to balance business with compliance.
