TSMC may soon be facing a hefty fine, potentially reaching 1 billion dollars. According to a report by Reuters, anonymous sources indicate that the US Department of Commerce is looking into TSMC’s indirect involvement with Huawei, specifically regarding the supply of an AI chip that ended up in one of Huawei’s chipsets. Huawei is currently on the US Entity List, which bars the company from engaging in business with American firms.

This restriction also applies to non-American companies that utilize US technology. Although TSMC did not manufacture the chip explicitly for Huawei, it produced a chip for a company called Sophgo, which later made its way into the Huawei Ascend 910B chipset. This situation has put TSMC in a difficult position with US authorities.

The US Department of Commerce has been conducting an investigation into TSMC’s operations for some time. In 2024, TSMC publicly denied any direct dealings with Huawei, emphasizing their commitment to compliance by stating that they would take appropriate action and communicate with relevant authorities if potential issues arose. Before being placed on the Entity List, Huawei was poised to challenge Apple and Samsung’s dominance in the smartphone market.

However, the ban significantly hindered its ambitions. In the wake of restrictions, Huawei has struggled to produce competitive chipsets, although they surprised many in 2024 by unveiling a new phone featuring a 7nm chipset developed in collaboration with SMIC. As Chinese companies seek to navigate the restrictions, some are exploring alternative technologies and developing their own EUV machines, especially in light of Dutch firm ASML’s decision not to supply China with this critical equipment.

This evolving landscape reflects the challenges and opportunities faced by companies amid ongoing trade tensions and restrictions.