TSMC Faces Potential Billion-Dollar Blow Over Huawei Chip Link: Report
Though TSMC has consistently denied direct business ties with Huawei since 2020, the company is being scrutinised for making nearly three million chips for Sophgo.
Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, may be staring down a penalty of over $1 billion as US authorities investigate whether the company violated export control rules. The probe centers around a chip made for China’s Sophgo that reportedly ended up powering Huawei’s Ascend 910B AI processor, sources familiar with the matter told Reuters.
Though TSMC has consistently denied direct business ties with Huawei since 2020, the company is being scrutinised for making nearly three million chips for Sophgo — whose design matches the one in Huawei’s AI chip. Given that Huawei has long been on a US trade blacklist, any component containing American technology made for the company is tightly regulated.
Export control rules allow for fines up to double the value of the transaction in question, which places TSMC’s potential liability well into the 10-figure range, according to sources.
A Complicated Crossfire of Chips, China, and Compliance
Huawei’s technological advancements have been a long-standing concern for US regulators, who have accused the company of sanctions violations and intellectual property theft. That concern has only grown with China's AI ambitions and Huawei’s position at the heart of it.
Lennart Heim, a researcher with RAND Corporation’s Technology and Security Policy Center, observed that “based on the design, which is for AI applications, TSMC should not have made the chip for a company headquartered in China, especially given the risk that it could be diverted to a restricted entity like Huawei.”
TSMC, whose manufacturing tools incorporate US technology, is bound by Washington’s rules — even at its factories in Taiwan. “We have not supplied to Huawei since mid-September 2020,” said TSMC spokesperson Nina Kao, while affirming the company’s cooperation with the Commerce Department and its commitment to legal compliance.
Political Crosswinds and Industry Fallout
The timing of this investigation is delicate. It comes just as US–Taiwan trade talks are back on the table, and after President Donald Trump imposed a 32 per cent tariff on imports from Taiwan — though semiconductors were spared. Trump has since hinted that chip levies may also be on the horizon.
While no formal action has yet been taken against TSMC, the process typically begins with a "proposed charging letter" detailing the alleged violations and providing the company 30 days to respond. The Department of Commerce has declined to comment on the ongoing probe.
Taiwan’s Economy Minister Kuo Jyh-huei weighed in cautiously, saying, “TSMC is a company that respects laws and regulations,” but noted that his office had not received any official communication about a fine.
Washington’s Warning: Tougher Penalties Ahead
US Commerce Secretary Howard Lutnick made it clear at a recent Washington conference that enforcement will intensify. “We are going to seek in this administration a dramatic increase in enforcement and fines for people who break the rules,” he said. “We have had enough of people trying to make a dollar supporting the people who seek to destroy our way of life.”
Jeffrey Kessler, who now oversees US export controls, echoed that view during his confirmation hearing in February. He called the TSMC-Huawei connection “a huge concern” and emphasised the need for “strong enforcement.”
Though a billion-dollar penalty would be rare, it wouldn’t be unprecedented. In 2023, Seagate Technology paid $300 million in a settlement over $1.1 billion in hard drive shipments to Huawei.
This latest case dates back to last year, when TechInsights — a Canadian firm — found a TSMC chip inside Huawei’s Ascend 910B AI accelerator. Soon after, TSMC halted shipments to Sophgo, and in November, the Commerce Department ordered a ban on supplying advanced AI-capable chips to China.
By January, Sophgo had also landed on the US restricted trade list. The company has denied connections to Huawei and could not be reached for comment.
As the world watches how this unfolds, one thing is clear: the global chip war is far from cooling down.
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