What just happened? TSMC could be fined more than $1 billion by the US Commerce Department for (apparently) inadvertently supplying sanctioned Huawei with a chiplet that ended up in the Ascend 910B AI accelerator. The enormous size of the penalty is a result of export control regulations that allow a fine of up to twice the value of transactions that violate the rules.
The Commerce Department has been investigating TSMC over its work for Chinese chip designer Sophgo, which was cut off from TSMC last year following allegations it was attempting to supply components to Huawei.
According to Reuters, which cites two unnamed people familiar with the matter, Huawei gave its chip designs to Sophgo after sanctions prevented it from working with TSMC. Sophgo, in turn, gave the blueprints to TSMC, suggesting they were its own designs.
TSMC suspended its shipments to Sophgo after discovering that the compute chiplet it had supplied was part of Huawei’s HiSilicon Ascend 910 series.
TSMC made almost 3 million chips in recent years that matched the design ordered by Sophgo and likely ended up with Huawei, according to researcher Lennart Heim, who is tracking Chinese developments in AI.
While TSMC could not have known the chip it was producing was destined to end up with Huawei, the fact it was a complex, expensive chiplet designed for AI applications and ordered by a small company mostly known for its links to mining hardware supplier Bitmain should have raised suspicions.
As Taiwan-based TSMC’s chipmaking tools include some American-made parts, the company is subject to US export controls on Huawei, meaning it would need to secure a license, which is almost never granted, to do business with the Chinese firm.
The potential fine comes at a time of strained relations between TSMC and the US. Trump has placed a 32% tariff on imports from Taiwan, and while it excludes chips, he said his team is looking at levies on semiconductors. The president also said he told TSMC that it would pay a tax of up to 100% if it did not build its plants in the United States.
In April 2023, storage giant Seagate was hit with a $300 million fine by the United States Department of Commerce for selling $1.1 billion worth of disk drives to Huawei. A company filing confirmed that between August 2020 and September 2021, it sold approximately 7.4 million HDDs, valued at roughly $1.1 billion, to Huawei and its entities.
