TSMC blew whistle on suspected verboten exports to Huawei – that may cost it $1B+

What did we learn today, hm?

TSMC could end up paying $1 billion or more to settle a US investigation into whether the Taiwanese outfit busted sanctions, inadvertently or not, by indirectly manufacturing AI accelerators for Huawei.

Citing two unnamed persons said to be familiar with the matter, Reuters on Tuesday reported the penalty could amount to as much as twice the value of transactions between TSMC and Chinese chip designer Sophgo last year.

As you may recall, Sophgo was accused in late 2024 of acting as a front for Huawei, which had been cut off from TSMC by US sanctions.

It was alleged Huawei, after being banned from working with TSMC, passed its AI chip designs to Sophgo, which in turn gave the blueprints to TSMC manufacture to order as if they were Sophgo's designs.

Sophgo would then give the finished chips to Huawei, without TSMC knowing, allowing Huawei to side-step American sanctions and acquire advanced semiconductors that should have been off limits, it was feared.

TSMC suspected this plan was afoot when Sophgo placed orders for a chip closely resembling Huawei's Ascend 910B AI accelerator, and raised the alarm to Uncle Sam.

As we've previously reported, the Ascend 910B is among Huawei's most-sophisticated processors, boasting performance roughly on par with a now five-year-old Nvidia A100, with 320 teraFLOPS of FP16 performance.

TSMC had previously manufactured Huawei's chips, including the Ascend series, up until the Chinese telecommunications titan was put on the US Entities List in 2019. Being on that list means you can't do business with or using American organizations and technologies without special permission from Uncle Sam, simply put.

Because TSMC relies on US tech to fabricate chips, those export controls extended to the Taiwanese corporation, and meant that as of 2020 Huawei could no longer source silicon dies from the foundry giant without permission from the United States.

These controls didn't however apply to Sophgo, a fabless chip designer specializing in the RISC-V instruction set, hence its role in the suspected scam. Although Sophgo denied the allegations of sanctions busting, US officials weren't buying it, and earlier this year Sophgo joined Huawei on the Entities List.

So to summarize:

1. Huawei had its top-end AI processor designs manufactured to order by TSMC's factories.
2. Huawei was cut off from TSMC as a supplier by US sanctions.
3. Huawei gave its AI accelerator chip designs to Sophgo, it's claimed.
4. Sophgo went to TSMC to have the chips manufactured, as if they were Sophgo's own designs, with the intention of quietly funneling the parts back to Huawei once completed, it's alleged.
5. TSMC, looking at the designs, thought they closely resembled Huawei's, put two and two together, cut off Sophgo, and alerted the US government of the suspected sanctions busting.

Despite blowing the whistle on the alleged shenanigans, it seems the Trump administration nonetheless intends to extract penalties from TSMC. This is despite the corporation's plans to expand US fab production to the tune of $100 billion, announced by CEO CC Wei alongside US President Donald Trump last month.

The reported penalties may be part of a broader crackdown by the US Bureau of Industry and Security on export violations.

"We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives," US Commerce Secretary Howard Lutnick said last month as part of another round of restrictions on AI exports. "We are committed to using every tool at the Department's disposal to ensure our most advanced technologies stay out of the hands of those who seek to harm Americans."

The Register reached out to the US Commerce Department and TSMC for comment; we'll let you know if we hear anything back. ®