TSMC faces billion-dollar US fine for alleged chip deliveries to Huawei

The world's largest chip contract manufacturer TSMC could be hit with a record-breaking billion-euro fine by the US for violating export bans on semiconductors. It is now being reported that the US Department of Commerce is investigating the chiplets allegedly produced by the Taiwanese chip manufacturer within Huawei's AI accelerators. This has been prohibited since September 2020 due to the trade restrictions imposed by the USA and supported by Taiwan.

TSMC technology was surprisingly found in Huawei's AI accelerator last fall. After an in-depth investigation into the processor of Huawei's Atlas 300T A2 AI accelerator card, it emerged that the Ascend 910B manufactured by Huawei subsidiary Hisilicon was partly produced in Taiwan. However, TSMC is completely prohibited from cooperating with Huawei and other Chinese companies. While Huawei even denied that it had ever brought the Ascend 910B to market, TSMC denied any deliveries to Huawei after September 2020.

Nevertheless, the mystery surrounding TSMC chips in Huawei accelerators continued, as the Chinese company Sophgo is said to have acted as an intermediary to smuggle TSMC chips to Huawei. This company, which specializes in AI chips for application-specific tasks, is said to have ordered the chips from TSMC and then passed them on to Huawei. However, TSMC has since stopped all deliveries to Sophgo and Sophgo itself immediately denied this. According to the company, it has provided TSMC with evidence showing that “Sophgo has nothing to do with the Huawei investigation”.

Investigation into 3 million chips

TSMC had stated last October that it was in communication with the US Department of Commerce regarding this matter and that there was no evidence that TSMC was currently the subject of an investigation. But now Reuters is reporting the opposite. According to the report, the Department of Commerce has indeed investigated the chip contract manufacturer's cooperation with Sophgo after a semiconductor component manufactured by TSMC was found in Huawei's Ascend 910B AI processor.

According to Lennart Heim, a researcher at the RAND Corporation's Technology and Security Center, TSMC has produced nearly three million chips over the past few years that match the Sophgo-contracted design, which apparently ended up at Huawei. RAND is one of the world's best-known think tanks and monitors China's developments in artificial intelligence (AI).

Billion-dollar fine would probably be a new record

A fine in the ten-digit range is rare for violations of export bans, as it is calculated based on the products delivered. In 2023, Seagate paid a record fine for hard disk deliveries to Huawei. This amounted to 300 million US dollars. The hard drive manufacturer and the US Department of Commerce had reached a settlement, with the value of the illegally supplied hard drives amounting to over 1.1 billion dollars.

When asked, the Department of Commerce would not comment on the TSMC investigation. A TSMC spokesperson reiterated that the chip contract manufacturer has not supplied Huawei since September 2020 and is cooperating with the Ministry of Commerce. The latter has not yet taken any action against TSMC. Typically, companies accused of violating export bans are informed of the investigation and possible penalties in advance so that they can react accordingly.

(fds)