TSMC could face over $1 Billion fine in US export control probe linked to Huawei: Reuters

Taiwan Semiconductor Manufacturing Co (TSMC) may be penalised over $1 billion to settle a US export control investigation, according to a report by Reuters, which cited two people familiar with the matter.

The US Department of Commerce is reportedly investigating TSMC’s work for Sophgo, a China-based chip design company. According to the Reuters report, a chip manufactured by TSMC for Sophgo matched one found in Huawei’s high-end Ascend 910B artificial intelligence processor. The individuals cited in the story requested anonymity as they were not authorised to speak publicly.

Because TSMC’s manufacturing process involves US-origin technology, its Taiwan-based factories fall under US export control laws. These restrictions prevent the company from producing chips for Huawei or certain advanced chips for any Chinese customer without a US licence.

Citing expert opinion, Reuters noted that based on the AI-focused design of the chip, TSMC should not have manufactured it for a company headquartered in China, given the possibility it could be diverted to a restricted entity such as Huawei.

The situation unfolds as US-Taiwan relations face renewed scrutiny, with trade negotiations underway. Last week, Trump imposed a 32% levy on imports from Taiwan, though the tariffs exclude chips. However, Trump has indicated that semiconductor tariffs are also under consideration.

In March, TSMC announced at the White House that it would invest $100 billion in the United States, including the construction of five new chip fabrication plants over the next few years.

Reuters said it could not determine how the Trump administration would proceed with TSMC or when the issue would be resolved. Senior officials have publicly stated they intend to seek tougher penalties for export violations.

A spokesperson for the US Commerce Department declined to comment on the investigation. Nina Kao, a spokesperson for TSMC, said in a statement to Reuters that the company is committed to complying with the law. She added that TSMC has not supplied chips to Huawei since mid-September 2020 and is cooperating with the Commerce Department.

Speaking to reporters in Taipei on Wednesday, Taiwan’s Economy Minister Kuo Jyh-huei said TSMC is a company that respects laws and regulations, but that his ministry had not received any notification about a possible fine and could not comment further.

As of now, no public action has been taken against TSMC. The typical course of action in such investigations involves the Commerce Department issuing a proposed charging letter that outlines the alleged violations, the estimated value, and a formula for calculating civil penalties. The company would then have 30 days to respond.