Why TSMC Could Face A $1 Billion US Fine And How Huawei Is Involved
The U.S. Department of Commerce is reportedly looking into TSMC's dealings with Sophgo, a chip designer located in China, over concerns that its silicon may have ended up in the hands of Huawei. Depending on the outcome of the investigation, TSMC could potentially face a fine upwards of $1 billion for violating U.S. export restrictions.
Citing two people who are purportedly familiar with the matter, Reuters reports that a chip designed by Sophgo and manufactured by TSMC is the same one found inside Huawei's Ascend 910B silicon, which itself is a second-generation artificial intelligence (AI) chip. The multi-chiplet processor is Huawei's answer to NVIDIA's AI silicon, which it doesn't have access to.
According to the report, TSMC manufactured millions of chips based on Sophgo's design, which are believed to have found their way to Huawei. The potentially massive fine is based on export control regulations that allow for penalties of up to twice the value of transactions that run afoul of the rules.
The same rules apply to TSMC's chips manufactured at its Taiwan facilities, because the company's chipmaking equipment leverages U.S. technology. In order to supply chips to a company like Huawei, which the U.S. Department of Commerce added to its Entity List in 2019, TSMC would need a license.
According to official documentation (PDF) by the U.S. Bureau of Industry and Security, Huawei was added to the Entity List "on the basis of information that provided a reasonable basis to
conclude that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interests and its non-U.S. affiliates pose a significant risk of involvement in activities contrary to the national security of the United States."
TSMC may not have known that the chips it was making for Sophgo would end up with Huawei. Whether that ultimately matters or not remains to be seen. Meanwhile, TSMC is cooperating with the Commerce Department's investigation. Additionally, a TSMC spokesperson said it has not supplied any chips to Huawei since September 2020.
It's a bit of a delicate situation all around. Last month, TSMC announced plans to spend $100 billion on five new U.S. chip factories to meet the booming demand for AI chips. And just last week, a report surfaced claiming TSMC and Intel are in the process of forming a joint chipmaking venture that would see TSMC hold a 20% stake in the new company.
Top image source: Taiwan Semiconductor Manufacturing Co., Ltd.
