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

• The U.S. Commerce Department is reportedly investigating TSMC over export control violations.
• Last year, TSMC-made chiplets were discovered in Huawei AI processors.
• Huawei uses proxy companies like Sophgo to circumvent U.S. sanctions.

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.