A $1 billion or more fine could be imposed on Taiwan Semiconductor Manufacturing to resolve a US export control inquiry about a chip that was used in a Huawei AI processor.
The probe centers on a TSMC chip for Sophgo, a Chinese company, which was purportedly used in Huawei's Ascend 910B AI processor.
Due to its violations of sanctions, Huawei is on the US trade blacklist.
Receiving products manufactured using US technology is forbidden.
Since TSMC uses US technology in its chipmaking equipment, US export control restrictions apply to its Taiwanese production sites.
TSMC might face a penalty of up to $1 billion, which would be a significant increase in export control enforcement compared to past incidents.
The prospective TSMC penalty is more than three times bigger than the closest comparable recent action, which was a $300 million fine against Seagate in 2023 for supplying hard drives to Huawei.
The government's enforcement capabilities were further enhanced by the Export Control Reform Act of 2018, which permits fines of up to twice the transaction value, as it seems to be in this instance 2.
This case highlights the worldwide effects of the Foreign Direct Product Rule by showing how the US is utilizing its legal power to control businesses that use American technology, even when all manufacturing takes place abroad.
Chips allegedly flowed through Sophgo to Huawei despite specified constraints, demonstrating how third-party intermediates can be utilized to get around limits in the TSMC case.
This circuitous path may have brought nearly three million TSMC-made chips to Huawei, underscoring the difficulty of identifying end users in intricate supply chains.
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After learning of the connection, the Commerce Department decided to put Sophgo on the same restricted trade list as Huawei in January.