TSMC is sued for patent infringement! Lawmakers urge strict prevention of patent-infringing chips from entering the U.S.; officials: everything is legal

TSMC is drawn into a U.S. patent infringement lawsuit, accused of infringing on chips made using the most advanced processes. Republican lawmakers are urging the ITC to strictly enforce the law and bar entry into the U.S.; TSMC emphasizes that it operates legally and in compliance. TSMC’s self-reported revenue for May also hit a new high.

TSMC Sued for Infringement, U.S. Lawmakers Call for Strict Crackdown on Infringing Chips

The world’s largest chip manufacturer, TSMC, has been swept into an infringement controversy! According to foreign media outlet Axios, it obtained exclusive letters, in which multiple U.S. Republican lawmakers are urging the U.S. International Trade Commission (ITC) to strictly enforce U.S. patent rights in cases involving TSMC.

The ITC’s investigation originates from complaints filed by Longitude Licensing and Marlin Semiconductor—two entities that are affiliated with IPValue Management, a San Francisco private equity firm under Vector Capital.

The complaints allege that TSMC’s production of chips using the most advanced process for global artificial intelligence accelerator chips infringes their patents. The patents held by Marlin Semiconductor were acquired in 2021 from Taiwan’s chip manufacturer United Microelectronics Corporation (UMC).

The complaint also names multiple companies, including Apple and Broadcom, but the core focus remains on TSMC, because it is the main source of silicon chips for almost all companies entering the U.S. market.

TSMC: We Are Operating Legally and in Compliance

This development has further intensified debate over whether TSMC should receive special treatment for providing the key chips that help the U.S. maintain a leading position in the AI race.

On May 22, lawmakers Ryan Zinke (House member), Tim Sheehy (Senator), Roger Marshall, and Bernie Moreno sent a letter to ITC Chair Amy Karpel, stating that the committee should block the import of foreign-made chips that have been found to infringe U.S. patents.

The lawmakers argue that strong enforcement can protect U.S. competitiveness, and that companies with strategic importance should not receive special treatment. TSMC responded that the company complies with local laws in all countries where it operates.

U.S. lawmakers Take Different Stances

Before the Republican lawmakers spoke up, Democratic Senators in Arizona—Ruben Gallego and Mark Kelly—and Representative Greg Stanton had warned that any measures affecting TSMC could disrupt semiconductor production, AI development, defense systems, and Arizona’s economy.

As of now, both sides still hold their own views: one side believes that issuing exclusion orders would undermine the supply of chips that the U.S. is striving to secure, while the other side argues that no company should be granted privileges due to its strategic position—otherwise it could prevent U.S. companies from ever catching up.

The Outcome of the Infringement Case Could Become a Test of the U.S.’s Dependence on TSMC

Axios also reports that this standoff is evolving into a test of whether U.S. reliance on TSMC is starting to influence how decision-makers handle disputes involving the company.

TSMC has committed to investing about $165 billion in its manufacturing projects in Arizona, making it a core part of the U.S. semiconductor strategy. Last year, 75% of TSMC’s revenue came from the North American market. Driven by the AI boom and chip supply shortages, TSMC’s stock price has risen cumulatively by about 42% so far this year.

Regarding the TSMC infringement case, administrative law judges are expected to issue an initial ruling in June, while the ITC is expected to make a final decision around October.

Looking Back to 2019, TSMC Also Had a Patent Infringement Lawsuit with GlobalFoundries

TSMC also faced patent disputes in 2019. According to the Central News Agency, TSMC and GlobalFoundries once launched a legal battle over cross-alleged patent infringement in 2019. At the time, GlobalFoundries first sued TSMC for infringing multiple patents, and TSMC then launched a counterattack.

Ultimately, at the end of October of that same year, both sides announced a settlement—withdrawing all legal proceedings—and reached a global patent cross-licensing agreement covering existing and future semiconductor technology patents over the next 10 years.

Image source: TSMC and GlobalFoundries previously engaged in patent infringement lawsuits in 2019

TSMC’s May Revenue Hits a New High; CFO Says No AI Bubble Concerns

TSMC’s self-reported revenue for May this year reached NT$416.9 billion, setting a monthly revenue record for the first time. However, TSMC’s CFO, Huang Ren-zhao, said in an interview with BBC that inflation has indeed led to increased business costs, so the company has not ruled out the possibility of product price increases.

In the interview, Huang Ren-zhao also denied claims that an AI bubble is about to burst, emphasizing that customers are strong and have abundant financial resources, and that the company is very confident in the overall AI trend.

Further Reading:
Not Just a Blacklist! Taiwan Plans to Fully Ban the Sale of AI Chips to China, Possibly Impacting TSMC and the Supply Chain?

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