TSMC Faces Potential $1 Billion Fine in US Probe Over Huawei AI Chip

US may fine TSMC $1B over chip allegedly used in Huawei AI processor | TechCrunch

Taiwan Semiconductor Manufacturing Company (TSMC) may have to pay a fine of $1 billion or more to resolve a U.S. export control investigation related to a chip it made that was used in a Huawei AI processor, according to a report by Reuters. TSMC did not provide any further comments as it is now "in [a] quiet period," a spokesperson for the chipmaker said in an emailed statement to TechCrunch. It's the latest development in a situation that first came to light in late 2024 involving TSMC, Huawei, and Xiamen Sophgo Technologies, a Chinese chip designer. Sophgo is an affiliate of Bitmain, a Bitcoin mining equipment supplier, and TSMC is the world's biggest contract chipmaker. Reports at the time indicated that a significant quantity of TSMC's export-controlled AI chip dies went into Huawei's mass-produced AI accelerator, the Ascend 910B AI processor. In nesting-doll fashion, it's alleged that TSMC's chip is built into Sophgo's chip, and Sophgo's chip is subsequently built into the Ascend 901B, per the report. This is important not just because of export rules but because Huawei's multi-chip processor is considered the most advanced in its class to be made in China. It's estimated that hundreds of thousands of these processors were produced with these components. "TSMC is a law-abiding company and we are committed to complying with all applicable rules and regulations, including applicable export controls," TSMC said in a statement. "In compliance with the regulatory requirements, TSMC has not supplied to Huawei since mid-September 2020. If we have any reason to believe there are potential issues, we will take prompt action to ensure compliance, including conducting investigations and proactively communicating with relevant parties, including customers and regulatory authorities, as necessary. We proactively communicated with the U.S. Commerce Department regarding the matter in the report and continue to support." TechInsights, a tech research firm in Ottawa, Canada, disassembled Huawei's 910B AI processor and discovered a TSMC-based chipset inside, per Reuters. The chipset resembled one made by Sophgo. Sophgo claimed that the U.S. Commerce Department's investigation into potential connections between TSMC and Huawei does not involve Sophgo or its product. Sophgo has never had any direct or indirect business dealings with Huawei, it added. The U.S. Department of Commerce ordered TSMC to halt shipments of advanced chips to Chinese customers, which included Sophgo. The U.S. Commerce Department considered adding Sophgo to the U.S. blacklist. The U.S. then added over twenty Chinese companies, including Zhipu AI, which specializes in developing large language models, and Sophgo.

TSMC faces $1 billion US fine for doing business with Huawei

TSMC may be hit with a fine exceeding $1 billion by the U.S. Commerce Department for unknowingly supplying Huawei a compute chiplet for the latter's Ascend 910-series AI processor, Reuters reports. Such a high fine would be rare and perhaps a record, though it also appears to reveal the volume of chips that Huawei got from TSMC by deception. The potential $1+ billion fine is based on export rules that allow for penalties up to double the value of any unauthorized transaction. So far, no official action has been taken against TSMC, according to the report. In similar cases, the Commerce Department typically sends a document known as a proposed charging letter, listing violation dates, transaction values, and fine calculations. The company is then given 30 days to respond. A past case in 2023 saw Seagate fined $300 million for sending hard disk drives worth $1.1 billion to Huawei. Last year, it turned out that a compute chiplet that TSMC made for Sophgo, an ally of cryptocurrency mining hardware supplier Bitmain, was actually a compute chiplet for Huawei's Ascend 910-series processor for AI. Huawei has been in the U.S. Department of Commerce's Entity List since mid-2020 and companies like TSMC need to apply for an export license from the USDOC to supply to Huawei products containing American technologies, which includes making chips using tools developed and made by U.S.-based companies. After TechInsights revealed that Huawei's HiSilicon Ascend 910-series used the chiplet, TSMC suspended its shipments to Sophgo and is now working with the Department of Commerce on the matter. In January, Sophgo was placed on the USDOC's Entity List. However, it remains unclear how many chiplets TSMC produced (indirectly) for Huawei. When TSMC is given a chip design to produce, it cannot determine its original developer as well as its end purpose or user. Therefore, mistakes like the one the company made with Sophgo can be made. However, that Ascend 910-series compute chiplet should probably have triggered alarms as it contained tens of billions of transistors (i.e., it was hard and expensive to develop), yet it came from a little-known company affiliated with a bitcoin mining hardware designer. This certainly made the U.S. Department of Commerce, which has done a lot to curb sales of advanced AI processors to Chinese Entities, particularly angry as some estimate that Sopgo procured millions of chiplets for Huawei. Since the scandal with Sophgo emerged in the fall of 2024, TSMC has become much more cautious. Earlier this year the company ceased its relationship with Singapore-based PowerAIR after its internal investigation raised concerns about possible violations of U.S. export controls. One of the problems for TSMC is that Huawei seems to use third-party companies that disguise themselves as 'independent' chip designers to obtain chips made by world-class companies like TSMC. Huawei itself then does everything it can to hide the origin of those chips in a bid to keep getting them despite restrictions imposed by the U.S. government. As a consequence, TSMC and other chipmakers may fall victims of Huawei's deception.

Exclusive: TSMC could face $1 billion or more fine from US probe, sources say

April 8 (Reuters) - Taiwan Semiconductor Manufacturing (2330.TW), opens new tab could face a penalty of $1 billion or more to settle a U.S. export control investigation over a chip it made that ended up inside a Huawei AI processor, according to two people familiar with the matter. The U.S. Department of Commerce has been investigating the world's biggest contract chipmaker's work for China-based Sophgo, the sources said. The design company's TSMC-made chip matched one found in Huawei's high-end Ascend 910B artificial intelligence processor, according to the people, who requested anonymity because they were not authorized to speak publicly about the matter. Huawei -- a company at the center of China's AI chip ambitions that has been accused of sanctions busting and trade secret theft -- is on a U.S. trade list that restricts it from receiving goods made with U.S. technology. TSMC made nearly three million chips in recent years that matched the design ordered by Sophgo and likely ended up with Huawei, according to Lennart Heim, a researcher at RAND's Technology and Security and Policy Center in Arlington, Virginia, who is tracking Chinese developments in AI. The $1 billion-plus potential penalty comes from export control regulations allowing for a fine of up to twice the value of transactions that violate the rules, the sources said. Because TSMC's chipmaking equipment includes U.S. technology, the company's Taiwan factories are within reach of U.S. export controls that prevent it from making chips for Huawei, or producing certain advanced chips for any customer in China without a U.S. license. Heim said 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. Penalizing TSMC comes at a critical moment for U.S.-Taiwan relations as the two countries begin re-negotiating their trading relationship after Trump last week slapped a 32% levy on imports from Taipei. The tariffs exclude chips, but Trump has said his team is looking at levies on semiconductors. In March, TSMC said at the White House that it plans to make a fresh $100 billion investment in the United States that includes building five additional chip facilities in coming years. Reuters could not determine how the Trump administration will proceed with TSMC or when the matter would be resolved. Top officials have said they plan to seek higher penalties for export violations. A spokesperson for the Commerce Department declined comment. TSMC spokesperson Nina Kao said in a statement that the company is committed to complying with the law. She added that TSMC has not supplied to Huawei since mid-September 2020 and that they are cooperating with the Commerce Department. No public action has been taken against TSMC. But typically, Commerce issues a "proposed charging letter" to a company it believes has engaged in prohibited conduct. The letter usually cites the dates alleged violations took place, the value, and the formula for a civil penalty, and it gives the company 30 days to respond. MORE ENFORCEMENT At a conference in Washington last month, U.S. Commerce Secretary Howard Lutnick spoke about the role of export control enforcement in addressing the threat from China. "We are going to seek in this administration a dramatic increase in enforcement and fines for people who break the rules," Lutnick 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 was confirmed in March as Under Secretary of Commerce for Industry and Security to oversee U.S. export controls, was more targeted at his Feb. 27 nomination hearing, saying that reports of TSMC chips going to Huawei was "a huge concern" and that "strong enforcement" was critical. A 10-figure fine for export control violations would be rare. In 2023, BIS imposed a $300 million penalty on Seagate Technology Holdings (STX.O), opens new tab as part of a settlement over its shipping over $1.1 billion worth of hard disk drives to Huawei, as first reported by Reuters. TSMC first came under scrutiny last fall. TechInsights, a Canadian tech research firm, took apart a Huawei 910B AI accelerator and found a TSMC die, as it's also called, in the multi-chip system. After the TechInsights finding, TSMC suspended shipments to Sophgo and, in November, as Reuters reported, the Commerce Department ordered the chipmaker to halt shipments to China of seven-nanometer or more advanced chips that could be used in AI applications. In January, Sophgo, which in October denied any business relationship with Huawei, was placed on the same Commerce department restricted trade list as Huawei. Sophgo could not be reached for comment. Huawei's Ascend 910B has been viewed as the most advanced mass-produced AI chip available from a Chinese company, providing an alternative to California-based industry leader Nvidia. Reporting by Karen Freifeld; editing by Chris Sanders and Anna Driver Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Technology

TSMC could face $1 billion or more fine from US probe, sources say

Taiwan Semiconductor Manufacturing (TSMC) is under U.S. investigation for potentially violating export controls by supplying chips that ended up in Huawei's AI processors. The U.S. Department of Commerce is examining TSMC's dealings with Sophgo, a Chinese design company, with a possible penalty exceeding $1 billion. This situation strains U.S.-Taiwan relations amid trade renegotiations and increased scrutiny of export violations.Taiwan Semiconductor Manufacturing could face a penalty of $1 billion or more to settle a U.S. export control investigation over a chip it made that ended up inside a Huawei AI processor, according to two people familiar with the matter. The U.S. Department of Commerce has been investigating the world's biggest contract chipmaker's work for China-based Sophgo, the sources said. The design company's TSMC-made chip matched one found in Huawei's high-end Ascend 910B artificial intelligence processor, according to the people, who requested anonymity because they were not authorized to speak publicly about the matter. Huawei - a company at the center of China's AI chip ambitions that has been accused of sanctions busting and trade secret theft - is on a U.S. trade list that restricts it from receiving goods made with U.S. technology. TSMC made nearly three million chips in recent years that matched the design ordered by Sophgo and likely ended up with Huawei, according to Lennart Heim, a researcher at RAND's Technology and Security and Policy Center in Arlington, Virginia, who is tracking Chinese developments in AI. The $1 billion-plus potential penalty comes from export control regulations allowing for a fine of up to twice the value of transactions that violate the rules, the sources said. Because TSMC's chipmaking equipment includes U.S. technology, the company's Taiwan factories are within reach of U.S. export controls that prevent it from making chips for Huawei, or producing certain advanced chips for any customer in China without a U.S. license. Heim said 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. Shares of TSMC traded in the U.S. erased a nearly 3% gain to trade slightly lower after the news. Penalizing TSMC comes at a critical moment for U.S.-Taiwan relations as the two begin re-negotiating their trading relationship after Trump last week slapped a 32% levy on imports from Taipei. The tariffs exclude chips, but Trump has said his team is looking at levies on semiconductors. In March, TSMC said at the White House that it plans to make a fresh $100 billion investment in the United States that includes building five additional chip facilities in coming years. Reuters could not determine how the Trump administration will proceed with TSMC or when the matter would be resolved. Top officials have said they plan to seek higher penalties for export violations. A spokesperson for the Commerce Department declined comment. TSMC spokesperson Nina Kao said in a statement that the company is committed to complying with the law. She added that TSMC has not supplied to Huawei since mid-September 2020 and that they are cooperating with the Commerce Department. Speaking to reporters in Taipei on Wednesday, Taiwan Economy Minister Kuo Jyh-huei said TSMC is a company that respects laws and regulations, but his ministry has not received any notification about a possible fine and he could not comment further. No public action has been taken against TSMC. But typically, Commerce issues a "proposed charging letter" to a company it believes has engaged in prohibited conduct. The letter usually cites the dates alleged violations took place, the value, and the formula for a civil penalty, and it gives the company 30 days to respond. At a conference in Washington last month, U.S. Commerce Secretary Howard Lutnick spoke about the role of export control enforcement in addressing the threat from China. "We are going to seek in this administration a dramatic increase in enforcement and fines for people who break the rules," Lutnick 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 was confirmed in March as Under Secretary of Commerce for Industry and Security to oversee U.S. export controls, was more targeted at his Feb. 27 nomination hearing, saying that reports of TSMC chips going to Huawei was "a huge concern" and that "strong enforcement" was critical. A 10-figure fine for export control violations would be rare. In 2023, BIS imposed a $300 million penalty on Seagate Technology Holdings as part of a settlement over its shipping over $1.1 billion worth of hard disk drives to Huawei, as first reported by Reuters. TSMC first came under scrutiny last fall. TechInsights, a Canadian tech research firm, took apart a Huawei 910B AI accelerator and found a TSMC die, as it's also called, in the multi-chip system. After the TechInsights finding, TSMC suspended shipments to Sophgo and, in November, as Reuters reported, the Commerce Department ordered the chipmaker to halt shipments to China of seven-nanometer or more advanced chips that could be used in AI applications. In January, Sophgo, which in October denied any business relationship with Huawei, was placed on the same Commerce department restricted trade list as Huawei. Sophgo could not be reached for comment. Huawei's Ascend 910B has been viewed as the most advanced mass-produced AI chip available from a Chinese company, providing an alternative to California-based industry leader Nvidia.

TSMC could face $1 billion or more fine from U.S. probe, sources say

Taiwan Semiconductor Manufacturing Co. (TSMC) could face a penalty of $1 billion or more to settle a U.S. export control investigation over a chip it made that ended up inside a Huawei artificial intelligence processor, according to two people familiar with the matter. The U.S. Department of Commerce has been investigating the world's biggest contract chipmaker's work for China-based Sophgo, the sources said. The design company's TSMC-made chip matched one found in Huawei's high-end Ascend 910B artificial intelligence processor, according to the people, who requested anonymity because they were not authorized to speak publicly about the matter. Huawei -- a company at the center of China's AI chip ambitions that has been accused of sanctions busting and trade secret theft -- is on a U.S. trade list that restricts it from receiving goods made with U.S. technology. TSMC made nearly 3 million chips in recent years that matched the design ordered by Sophgo and likely ended up with Huawei, according to Lennart Heim, a researcher at RAND's Technology and Security and Policy Center in Arlington, Virginia, who is tracking Chinese developments in AI.

Huawei's AI Chip Lands TSMC in Hot Water With US Commerce Department Despite Efforts To Cut Ties

After components made by Taiwan Semiconductor Manufacturing Company (TSMC) were discovered in Huawei's AI processors, TSMC has moved to crack down on attempts to circumvent U.S. sanctions. Nevertheless, the Huawei case continues to weigh heavily on TSMC, which could be on the line for a billion-dollar penalty. TSMC Faces $1 Billion Fine Amid Commerce Department Probe As first reported by Reuters, the U.S. Commerce Department has been investigating TSMC over its work for Sophgo. In September 2024, Sophgo was implicated in the discovery of TSMC-made chiplets in Huawei's Ascend 910B. The company has since been accused of diverting technology to Huawei in violation of U.S. export restrictions. Although TSMC appears to have been tricked into manufacturing components for the sanctioned Chinese tech firm, the Commerce Department probe may still result in a fine of $1 billion or more, Reuters reported. Escalating U.S. Sanctions Even before the Sophgo controversy, TSMC was restricted from shipping technology to an extensive list of Chinese firms. But in recent months, the Commerce Department has introduced even more export controls designed to halt China's technological advancement. A slate of new restrictions in November blocked the Taiwanese firm from selling components made using 7nm or smaller processes to Chinese customers. The enhanced export controls could help ensure Huawei and other sanctioned entities don't use proxies like Sophgo to acquire advanced chips. However, there is evidence that the firm is using non-Chinese companies to skirt the new rules. Cracking Down on Huawei Proxies In the wake of the Sophgo incident, TSMC has moved to crack down on other potential Huawei proxies. In October, the company said it "proactively communicated" with the Commerce Department regarding an order for components that could be used in Huawei AI processors. Then, in January, TSMC ended its relationship with PowerAIR, a low-profile Singaporean firm that was flagged as suspicious during a client review. Without a satisfactory explanation for its orders, the Taiwanese chipmaker concluded that there was a high risk that PowerAIR was yet another Huawei proxy.

Exclusive-TSMC could face $1 billion or more fine from US probe, sources say

(Reuters) -Taiwan Semiconductor Manufacturing could face a penalty of $1 billion or more to settle a U.S. export control investigation over a chip it made that ended up inside a Huawei AI processor, according to two people familiar with the matter. The U.S. Department of Commerce has been investigating the world's biggest contract chipmaker's work for China-based Sophgo, the sources said. The design company's TSMC-made chip matched one found in Huawei's high-end Ascend 910B artificial intelligence processor, according to the people, who requested anonymity because they were not authorized to speak publicly about the matter. Huawei -- a company at the center of China's AI chip ambitions that has been accused of sanctions busting and trade secret theft -- is on a U.S. trade list that restricts it from receiving goods made with U.S. technology. TSMC made nearly three million chips in recent years that matched the design ordered by Sophgo and likely ended up with Huawei, according to Lennart Heim, a researcher at RAND's Technology and Security and Policy Center in Arlington, Virginia, who is tracking Chinese developments in AI. The $1 billion-plus potential penalty comes from export control regulations allowing for a fine of up to twice the value of transactions that violate the rules, the sources said. Because TSMC's chipmaking equipment includes U.S. technology, the company's Taiwan factories are within reach of U.S. export controls that prevent it from making chips for Huawei, or producing certain advanced chips for any customer in China without a U.S. license. Heim said 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. Shares of TSMC traded in the U.S. erased a nearly 3% gain to trade slightly lower after the news. Penalizing TSMC comes at a critical moment for U.S.-Taiwan relations as the two begin re-negotiating their trading relationship after Trump last week slapped a 32% levy on imports from Taipei. The tariffs exclude chips, but Trump has said his team is looking at levies on semiconductors. In March, TSMC said at the White House that it plans to make a fresh $100 billion investment in the United States that includes building five additional chip facilities in coming years. Reuters could not determine how the Trump administration will proceed with TSMC or when the matter would be resolved. Top officials have said they plan to seek higher penalties for export violations. A spokesperson for the Commerce Department declined comment. TSMC spokesperson Nina Kao said in a statement that the company is committed to complying with the law. She added that TSMC has not supplied to Huawei since mid-September 2020 and that they are cooperating with the Commerce Department. No public action has been taken against TSMC. But typically, Commerce issues a "proposed charging letter" to a company it believes has engaged in prohibited conduct. The letter usually cites the dates alleged violations took place, the value, and the formula for a civil penalty, and it gives the company 30 days to respond. MORE ENFORCEMENT At a conference in Washington last month, U.S. Commerce Secretary Howard Lutnick spoke about the role of export control enforcement in addressing the threat from China. "We are going to seek in this administration a dramatic increase in enforcement and fines for people who break the rules," Lutnick 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 was confirmed in March as Under Secretary of Commerce for Industry and Security to oversee U.S. export controls, was more targeted at his Feb. 27 nomination hearing, saying that reports of TSMC chips going to Huawei was "a huge concern" and that "strong enforcement" was critical. A 10-figure fine for export control violations would be rare. In 2023, BIS imposed a $300 million penalty on Seagate Technology Holdings as part of a settlement over its shipping over $1.1 billion worth of hard disk drives to Huawei, as first reported by Reuters. TSMC first came under scrutiny last fall. TechInsights, a Canadian tech research firm, took apart a Huawei 910B AI accelerator and found a TSMC die, as it's also called, in the multi-chip system. After the TechInsights finding, TSMC suspended shipments to Sophgo and, in November, as Reuters reported, the Commerce Department ordered the chipmaker to halt shipments to China of seven-nanometer or more advanced chips that could be used in AI applications. In January, Sophgo, which in October denied any business relationship with Huawei, was placed on the same Commerce department restricted trade list as Huawei. Sophgo could not be reached for comment. Huawei's Ascend 910B has been viewed as the most advanced mass-produced AI chip available from a Chinese company, providing an alternative to California-based industry leader Nvidia. (Reporting by Karen Freifeld; editing by Chris Sanders and Anna Driver)