Taiwanese chipmaker TSMC faces $1 billion fine after inadvertently supplying Huawei

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The Taiwanese semiconductor giant, TSMC, could be hit with a massive $1 billion fine for producing hardware that ended up in the hands of Huawei, a sanctioned company. The chip that TSMC created was made for the Chinese firm Sophgo but it was later found to match the chip used in Huawei's high-end Ascend 910B AI processor.

Sources who spoke to Reuters about the issue said that TSMC may have violated US export control restrictions by supplying the chips to Sophgo, which later fell into the hands of Huawei. This is the basis for the US wanting to hit TSMC with the $1 billion fine.

Under the export control regulations, violators can be fined up to twice the value of transactions that violate the rules. Given that the US is looking at a $1 billion fine, it suggests that TSMC made a significant transaction of $500 million with Sophgo. For reference, Companies Market Cap says that TSMC’s earnings were nearly $43 billion in 2024.

While it may seem strange that a Taiwanese company is affected by US export controls, the reason it is affected is because it uses US technology to make its chips. That means it cannot make chips for Huawei and certain advanced chips for any Chinese business without a license from the US.

The entity conducting the investigation into TSMC is the US Department of Commerce. TSMC, for its part, says it's committed to complying with the law and has not supplied Huawei since September 2020. The Taiwanese chip maker said that it’s working with the Department of Commerce in its investigation - this action could potentially see a reduction in any fine it receives.

The discovery of TSMC hardware inside an Huawei product was made by the Canadian company TechInsights. This put TSMC under more intense scrutiny from the US, which is trying to keep Huawei from obtaining hardware built using its technology. After the discovery, TSMC halted shipments to Sophgo and the US blacklisted the Chinese firm. The US Commerce Department also made TSMC halt shipments to China of chips smaller than 7 nanometers.

Source: Reuters