Reuters: TSMC may face a heavy fine of $1 billion from the United States! Investigated for allegedly manufacturing AI chips for Huawei.

According to Reuters, TSMC, the global leader in semiconductor foundry, is facing an export control investigation by the U.S. Department of Commerce. This stems from a chip produced for the Chinese design company Sophgo, which is suspected to have ultimately fallen into the hands of Huawei, a company sanctioned by the U.S. Sources indicate that if the investigation is confirmed, TSMC could face fines exceeding $1 billion.

Chip bypass? TSMC is involved in indirectly manufacturing AI processors for Huawei.

According to two informed sources, the U.S. Department of Commerce is investigating whether TSMC violated export control regulations by assisting the Chinese company Sophgo in the production of chips that ultimately appeared in Huawei's Ascend 910B artificial intelligence processor. This high-end AI chip is of critical strategic significance for China's development of AI technology.

Sources indicate that the design of this chip is highly similar to the Sophgo chip manufactured by TSMC. TechInsights previously dismantled Huawei's AI processor and found that it contains chip components from TSMC, raising further concerns.

The fine of over 1 billion dollars may come from the "double transaction value" clause.

According to export control regulations, if a violation occurs, TSMC may be fined an amount equivalent to twice the value of the illegal transaction. Considering that TSMC has manufactured nearly 3 million chips for Sophgo in the past few years, the total value could likely result in fines exceeding 1 billion USD.

This will become one of the rare records of heavy penalties in the history of export controls. In 2023, the United States imposed a fine of $300 million on SeaGate.io for exporting hard drives to Huawei, which was the highest amount at that time.

United States: Chips made using American technology are also within our regulatory scope.

Although TSMC is located in Taiwan, it is still subject to U.S. export control regulations due to the American technology included in its semiconductor equipment. Especially concerning Huawei and other Chinese companies listed on the "Entity List," TSMC should not produce advanced process chips without obtaining U.S. permission.

Lennart Heim, a technology and security policy expert at RAND, pointed out that judging by the nature of the chip's AI applications, TSMC should not have accepted orders from companies in China, especially when it may eventually flow to restricted objects such as Huawei.

Political timing is sensitive, and the trade relationship between the US and Taiwan may be affected.

The timing of this incident is quite sensitive. Former President Trump has recently reintroduced a 32% import tariff on Taiwan (excluding chips) and claimed he is considering whether to impose taxes on semiconductors. At this time, any punitive measures by the United States against TSMC would undoubtedly bring additional pressure to the trade negotiations between Taiwan and the United States.

TSMC announced in March at the White House that it will invest up to $100 billion in the United States, planning to build five new fabs. If heavily fined, it could impact its expansion plans in the U.S.

TSMC stated: After 2020, it has not supplied Huawei and is cooperating with the investigation.

In this regard, a TSMC spokesperson stated that TSMC has not supplied any products to Huawei since mid-September 2020, emphasizing that the company continues to comply with international laws and regulations, and is currently actively cooperating with the investigation by the U.S. Department of Commerce.

The Ministry of Commerce has not yet taken any public action against TSMC. However, based on past practices, if violations are confirmed, the Ministry may issue a "proposed penalty notice" outlining the violation time, transaction amount, and penalty formula, and give the company a 30-day response period.

Senior officials from the Ministry of Commerce: Violators "will face harsher penalties"

The U.S. Department of Commerce recently emphasized that it will strengthen export control enforcement. Secretary of Commerce Howard Lutnick stated at a meeting in Washington, "We are fed up with those who help hostile forces for profit."

The newly appointed Deputy Secretary of Industry and Security responsible for export controls, Jeffrey Kessler, also pointed out that reports of TSMC chips flowing to Huawei are "extremely concerning," emphasizing that strong enforcement is imperative.

Sophgo claims to have no business relations with Huawei, yet is still listed on the blacklist.

Sophgo denied any business dealings with Huawei in October last year, but it has been placed on the same entity list as Huawei by the United States in January this year. The company has not yet made a public response to this incident.

Huawei's Ascend 910B processor is regarded as the most advanced AI chip currently in mass production in China and is one of the important breakthroughs for China in countering the US AI chip blockade. It is widely seen as a potential alternative to NVIDIA in the Chinese market.

This article Reuters: TSMC may face a heavy fine of 1 billion USD from the United States! Suspected of being investigated for OEM production of AI chips for Huawei, first appeared in Chain News ABMedia.