TSMC may face $1 billion US fine over alleged export violation tied to China’s Huawei

Due to its reliance on US-origin technology, TSMC’s global chip manufacturing operations are subject to American export control laws, which restrict the production or export of advanced semiconductors to blacklisted Chinese firms without proper licensing

Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading contract chipmaker, may be facing a fine exceeding $1 billion in connection with a US probe into potential breaches of export control regulations. The scrutiny arises from the company's reported involvement in producing a chip for a Chinese firm that appears to mirror technology found in a restricted Huawei processor.

According to reports citing individuals familiar with the matter, US authorities are investigating TSMC’s business relationship with Sophgo, a Chinese semiconductor design company. A chip made by TSMC for Sophgo is believed to closely resemble one used in Huawei’s Ascend 910B—an advanced artificial intelligence processor designed for high-performance computing.

Given TSMC’s use of US-origin technology in its chip manufacturing processes, its overseas operations fall within the scope of American export control laws. These regulations prohibit the manufacturing or export of certain advanced technologies to Chinese firms—especially those blacklisted by the US government—without prior licensing.

TSMC caught in trade crossfire

Experts reportedly suggest that if the AI chip designed for Sophgo shares substantial architectural or functional overlap with Huawei’s restricted hardware, the situation could be interpreted as an indirect circumvention of export controls. While there is no indication that TSMC knowingly violated these rules, the mere possibility of technological diversion is enough to trigger serious legal and financial consequences.

The development places TSMC in a delicate position as tensions continue to build between Washington and Beijing over technology access and supply chain security. It also comes amid broader shifts in US-Taiwan trade dynamics. More recently, President Donald Trump imposed a sweeping 32% tariff on Taiwanese imports—excluding semiconductors for the time being. However, Trump has publicly floated the idea of expanding tariffs to include chips, a move that would impact Taiwan's most vital industry.

TSMC has sought to strengthen its US presence in recent years, pledging $100 billion in investments to establish a network of semiconductor fabrication plants in the country. The move is widely seen as a gesture of goodwill and strategic alignment with US goals of reshoring critical technology production.

TSMC denies Huawei chip supply

Responding to the report, TSMC stated that it has not supplied chips to Huawei since September 2020 and remains committed to complying with all relevant laws and regulations. The company also confirmed that it is cooperating with the US Commerce Department in the ongoing inquiry.

In Taipei, Taiwan’s Economy Minister Kuo Jyh-huei commented that TSMC is widely regarded as a company that respects international laws and trade protocols. However, he added that his ministry had not received formal notice of any potential penalties and would refrain from further comment.

While no official charges have been announced, US export control enforcement typically begins with a proposed charging letter. This document outlines the alleged violations, the financial scope of the infraction, and the recommended penalty. The target company is usually given 30 days to respond before any enforcement action is finalized.

As one of the most strategically important players in global technology, TSMC's next steps will be closely watched by industry leaders, policymakers, and international trade observers alike.