TSMC could face a fine of over $1 billion for violating the Huawei export ban

TSMC may face a $1B fine for unintentional Huawei rule breach.

: TSMC is under scrutiny by the U.S. Commerce Department for allegedly supplying Huawei with restricted chip technology indirectly through Sophgo. The Taiwanese semiconductor giant might receive a fine surpassing $1 billion due to the complex nature of the AI chips and possible export control violations. Sophgo, a company linked with Bitmain, purportedly received Huawei’s design and passed it off as its own to TSMC. With diplomatic tensions and increasing tariffs, TSMC’s U.S. relations remain strained, mirroring Seagate's $300 million incident with Huawei.

Taiwan Semiconductor Manufacturing Company (TSMC) is under investigation by the U.S. Commerce Department for potentially violating export controls concerning Chinese tech firm Huawei. The breach involves the inadvertent supply of a chiplet integrated into Huawei's Ascend 910B AI accelerator. The Commerce Department contends that despite the alleged indirect transfer through Sophgo, TSMC bore the responsibility to ensure compliance, resulting in a looming $1 billion fine, double the transaction's value due to regulatory stipulations.

Investigations have revealed that Huawei, barred from directly engaging with TSMC, allegedly provided its chip designs to Sophgo, a smaller Chinese company with noted affiliations to Bitmain, known for mining hardware. Sophgo subsequently submitted these designs to TSMC, misleadingly presenting them as their own. Consequently, 3 million chips produced by TSMC aligning with Huawei’s specifications reached the market, as noted by researcher Lennart Heim.

The complexity of the chips ordered by a relatively unknown entity should have prompted suspicion within TSMC, given their intricate design tailored for AI applications, which are typically procured by more established companies. TSMC’s use of American-made manufacturing components subjects them to U.S. export control laws, particularly against companies like Huawei in the absence of a license, a scenario seldom permitted.

The potential financial implications of this violation come amidst rising tensions between TSMC and the United States. The Trump administration has imposed a 32% tariff on Taiwanese imports, undertaking a review that might extend to semiconductors. Amidst this diplomatic climate, TSMC faces pressure to relocate or expand manufacturing efforts stateside to mitigate such fiscal threats, tied to a potential levy on imported semiconductor goods.

This investigation draws parallels with Seagate's predicament, where the U.S. Commerce Department fined the company $300 million for executing a $1.1 billion HDD sale to Huawei and its associates between August 2020 and September 2021. Collectively, these cases underscore the challenging regulatory environment governing international trade in high-tech components, particularly amid increasing Sino-American tensions.

Sources: Reuters, TechSpot, TSMC, U.S. Commerce Department, Lennart Heim

Regulations