TSMC's Whistle-Blowing on Suspected Illegal Exports to Huawei Could Cost Billions

What lessons did we cover today, huh?

TSMC might have to pay $1 billion or even more to resolve an American inquiry into potential violations of sanctions through indirect production of AI accelerator chips for Huawei, which is considered TSMC’s arch-rival/ nemesis in Chinese.

According to Reuters, citing two anonymous sources who are knowledgeable about the situation, the fine might be up to double the worth of the deals conducted between TSMC and the Chinese semiconductor company Sophgo in the previous year. This report was published on Tuesday.

As mentioned earlier, Sophgo faced allegations in late 2024 regarding its role as a proxy for Huawei. The accusations suggested that Sophgo enabled Huawei to bypass U.S. trade restrictions and obtain sophisticated semiconductor chips that were supposed to be inaccessible. Notably, TSMC became wary when Sophgo ordered a chip similar to Huawei’s Ascend 910B AI accelerator and subsequently alerted authorities in Washington about this potential violation.

As we have previously mentioned, the Ascend 910B stands out as one of Huawei’s most advanced processors, offering performance levels comparable to a five-year-old Nvidia A100 chip, featuring around 320 teraFLOPS for half-precision floating-point operations.

Previously, TSMC manufactured silicon for Huawei’s processors, such as the Ascend lineup, until the Chinese telecom giant was placed on the US Entities List in 2019. This listing essentially bars them from conducting business with or utilizing American entities and technology unless they receive specific authorization from the U.S. government.

Since TSMC depends on U.S. technology for chip production, these export restrictions were also applied to Taiwanese facilities. Consequently, starting in 2020, Huawei was unable to obtain semiconductors from this major foundry without obtaining approval from the United States.

These regulations did not extend to Sophgo, a fabless semiconductor company focused on designing chips for the RISC-V architecture, despite their denial of engaging in sanction violations. Nevertheless, U.S. authorities were skeptical and eventually listed Sophgo alongside Huawei on the Entity List earlier this year.

Even though TSMC reported some suspected misconduct, the Trump administration still aims to impose fines on the company. This move comes regardless of TSMC’s announcement with CEO CC Wei and U.S. President Donald Trump last month about investing $100 billion to increase semiconductor manufacturing capacity in the U.S.

These penalties could potentially be part of an extensive effort by the US Bureau of Industry and Security to address export violations.

“We won’t permit competitors to use U.S. technological advancements to strengthen their military forces and endanger American citizens,” stated US Commerce Secretary Howard Lutnick earlier this month as part of additional limitations on artificial intelligence exports. “We are dedicated to leveraging all available resources within the department to prevent our leading-edge technologies from falling into the possession of individuals intending to cause harm to Americans.”

The Register contacted the U.S. Commerce Department and TSMC for their insights; we will update you once we receive a response.

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