Recent reports indicate Huawei’s actions could potentially cost TSMC, Apple’s main chip manufacturer, over $1 billion. The U.S. Department of Commerce is currently investigating TSMC’s involvement with Sophgo, a design firm based in China. It appears that TSMC has produced approximately three million chips closely related to designs ordered by Sophgo, which likely found their way to Huawei’s high-end Ascend 910B AI processor. Due to the presence of U.S. technology in TSMC’s manufacturing processes, its factories, even those located in Taiwan, are subject to U.S. export regulations.
Consequently, TSMC is prohibited from legally producing chips for Huawei or any advanced chips for other Chinese firms without obtaining a U.S. license. TSMC has stated its commitment to adhering to these laws and highlighted that it has not supplied any products to Huawei since September 2020, cooperating fully with the Commerce Department’s inquiries. This situation emerges at a crucial time in U.S.-Taiwan relations, especially following a 32% tariff imposed by the Trump administration on imports from Taiwan, although chips were exempted from this particular levy. Nevertheless, the possibility still looms that semiconductors could become the next target.
Evidence suggests Huawei has potentially acquired TSMC chips through what has been described as a “supply chain breach,” allowing them access to over two million AI chips against the backdrop of the export ban that has been in effect since 2020. TSMC now faces the risk of significant financial penalties for this breach of U.S. export control laws, with fines potentially amounting to twice the value of the illegal transactions. As investigations progress, TSMC is planning substantial investments in the U.S., including the construction of five new chip facilities in the coming years.