Sources said the U.S. Department of Commerce has been investigating the world’s largest contract manufacturer’s work at China-based Smith. According to people who asked to be anonymous, the design company’s TSMC-made chip matches the chips for Huawei’s high-end 910B artificial intelligence processors because they have no right to talk about the matter publicly, and they demand anonymity.
Huawei – a company at the China AI ChIP Ambition Center has been accused of violating sanctions and trade secret theft – is on the U.S. trade list, which restricts its acceptance of U.S. technology.
According to researchers at the Rand Center for Technology and Security and Policy in Arlington, Virginia, TSMC has made nearly 3 million chips in recent years, matching the designs ordered by Sophgo and possibly eventually combined with Huawei.
Sources say the potential fines of more than $1 billion come from export control regulations, allowing fines to be at most twice the value of transactions that violate the rules.
Because TSMC’s chip manufacturing equipment includes U.S. technology, the company’s Taiwan factory is within U.S. export controls, preventing it from making chips for Huawei or producing certain premium chips for any Chinese customer without a U.S. license. Based on designs for AI applications, TSMC should not make bargaining chips for Chinese-based companies, especially given the risk of shifting them to restricted entities like Huawei, Heim said. In the United States, TSMC-traded TSMC stock deleted nearly 3% of its earnings, slightly lower at lower trading.
The U.S. relationship was punished for a critical moment as the two began to renegotiate their deal after Trump imposed a 32% tax on imports from Taipei last week. Tariffs do not include chips, but Trump said his team is levied on semiconductors.
TSMC said in March at the White House that it plans to make $100 billion in new investments in the U.S., which includes building five additional chip facilities in the coming years.
Reuters cannot determine how the Trump administration will conduct TSMC or when to resolve the issue. Senior officials said they plan to seek higher penalties for export violations.
A spokesperson for the Ministry of Commerce declined to comment. TSMC spokesman Nina Kao said in a statement that the company is committed to complying with the law. She added that TSMC has not provided it to Huawei since mid-September 2020 and that they are working with the Ministry of Commerce.
Speaking to a reporter in Taipei on Wednesday, Taiwan’s Economic Minister Kuo Jyh-Huei said TSMC is a company that respects laws and regulations, but his ministry has not received any notice of possible fines and he cannot comment further.
No public action was taken against TSMC. But usually, businesses send “proposed charging letters” to companies they believe are engaged in prohibited behavior. The letter usually cites the so-called formula for violation dates, values and civil penalties and provides a 30-day response to the company.
More law enforcement
At a meeting in Washington last month, U.S. Commerce Secretary Howard Lutnick talked about the role of export control enforcement in addressing China’s threat.
“We will seek enforcement and fines for those who violate the rules in this administration,” Lutnik said. “We have enough people trying to make money to support those who are trying to undermine our lifestyle.”
Jeffrey Kessler, who was identified as industry and security industry secretary in March to oversee U.S. export controls, was more targeted at the February 27 nomination hearing, saying the reports on Tsmc chips’ trip to Huawei were “a huge concern” and “strong execution” was crucial.
A 10-digit fine for breach of export controls will be rare. In 2023, BIS imposed a $300 million fine on Seagate Technology Holdings, part of its shipment of goods, which it transported more than $1.1 billion of hard drives driving towards Huawei, Reuters first reported.
Last fall, TSMC was first under scrutiny. Canadian technology research firm Techinsights disassembled the Huawei 910B AI accelerator and found the TSMC mold in a multi-chip system.
After TechInsight discovered the discovery, TSMC suspended shipments to Sophgo, and as Reuters reported, the Commerce Department ordered the chipmaker to stop using Chinese shipments of seven nanometers or more used in AI applications.
In January, Sophgo denied any business relationship with Huawei in October and was placed on the same commerce ban on trade restrictions with Huawei. Sophgo cannot be contacted for comment.
Huawei’s Rising 910b is considered the most advanced mass-produced AI chips for a Chinese company, providing an alternative to Nvidia, an industry leader in California.
