it made that eventually ended up inside a Huawei AI processor, according to two sources familiar with the matter.
The Department of Commerce has also been investing in the world’s biggest contract chipmaker’s work for China-based Sophgo. The design company’s TSMC-made chip matched one found in Huawei’s high-end Ascend 910B artificial intelligence processor, as the people who requested anonymity due to not being authorized to speak about the matter publicly.
Huawei, a company that is at the centre of China’s AI chip ambitions, has also been accused of measures regarding trade secret theft, as mentioned in a list that restricts it from receiving goods that are made with the help of U.S. technology.
According to Lennart Heim, a researcher at RAND’s Technology and Security Policy Center in Arlington, Virginia, TSMC also made almost three million chips in the most recent years, matching the design ordered by Sophgo, and most likely ended up with Huawei.
It is also worth mentioning that the $1 billion-plus potential penalty might have also come from the export control regulations, which allow for a fine of up to twice the value of transactions that violate the rules, according to the source, reported Reuters.
Due to TSMC’s chipmaking equipment, including technology that is created in the U.S., the company’s Taiwanese factories are within reach of the U.S. export controls that also prevent it from creating chips for Huawei. This also includes the production of certain advanced chips for any customer in China without a U.S. license.
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Heim also said that due to the design they are using, TSMC should also not have made the chip for a company that is headquartered in China, even more so due to the risk that could be diverted to an entity that is restricted, such as Huawei.
Even more so, the shares from TSMC traded in the U.S. erased a 3% gain to trade slightly lower after the news.
During a conference in Washington last month, the US Commerce Secretary Howard Lutnick spoke about the role of export control enforcement in the matter regarding the threat coming from China. Lutnick mentioned, "We are going to seek in this administration a dramatic increase in enforcement and fines for people who break the rules," also adding, "We have had enough of people trying to make a dollar supporting the people who seek to destroy our way of life."
It is also worth noting that TSCM first came under scrutiny last fall. As the findings under the TSMC suspended shipments to Sophgo and in November, the Commerce Department also ordered the chipmaker to halt shipments to China of seven-nanometer or more advanced chips that can be used in the creation of AI apps.
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