Taiwan Semiconductor Manufacturing Company may have to pay a fine of $1 billion or more to resolve a U.S. export control investigation involving a chip it made that was allegedly used in a Huawei AI processor, according to a report by Reuters.
The matter puts TSMC, Huawei, and Xiamen Sophgo Technologies at the center of a supply chain question: how an export-controlled chip die from the world's biggest contract chipmaker may have ended up inside a mass-produced AI accelerator from Huawei.
Why the TSMC investigation matters
The investigation is focused on a chip TSMC made that was allegedly used in Huawei's Ascend 910B AI processor. The issue first came to light in late 2024 and has since drawn attention because it touches both export controls and China's advanced AI chip development.
Huawei's multi-chip processor is described in the source as the most advanced in its class to be made in China. Reports cited in the source indicated that a significant quantity of TSMC's export-controlled AI chip dies went into Huawei's mass-produced AI accelerator.
The possible fine is large on its own. But the bigger question is how regulators interpret the movement of advanced chip components through suppliers, customers, and related products when export rules apply.
The alleged path through Sophgo
The reported chain is complex. The source describes the allegation as a nested structure: TSMC's chip is built into Sophgo's chip, and Sophgo's chip is subsequently built into the Ascend 901B.
Xiamen Sophgo Technologies is a Chinese chip designer. It is an affiliate of Bitmain, a Bitcoin mining equipment supplier. Sophgo's role matters because the chipset found in Huawei's 910B AI processor reportedly resembled one made by Sophgo.
TechInsights, a tech research firm in Ottawa, Canada, disassembled Huawei's 910B AI processor and discovered a TSMC-based chipset inside, per Reuters. That finding helped connect the technical evidence to the export control questions now surrounding TSMC, Huawei, and Sophgo.
Sophgo has denied a direct link to Huawei. According to the source, Sophgo claimed that the U.S. Commerce Department's investigation into potential connections between TSMC and Huawei does not involve Sophgo or its product. It also said it has never had any direct or indirect business dealings with Huawei.
What TSMC says about compliance
TSMC did not provide further comment to TechCrunch because it is now in a quiet period, according to a spokesperson for the chipmaker. The company has separately emphasized that it follows applicable rules and export control requirements.
In its statement, TSMC said it is a law-abiding company and is committed to complying with all applicable rules and regulations, including applicable export controls. It also said that, in compliance with regulatory requirements, it has not supplied Huawei since mid-September 2020.
TSMC said that if it has reason to believe there are potential issues, it will take prompt action to ensure compliance. That includes investigations and proactive communication with relevant parties, including customers and regulatory authorities, as necessary.
The company also said it proactively communicated with the U.S. Commerce Department regarding the matter in the report and continues to support the process.
U.S. actions around Chinese chip customers
The source outlines a series of U.S. actions connected to advanced chip shipments and Chinese companies. The U.S. Department of Commerce ordered TSMC to halt shipments of advanced chips to Chinese customers, including Sophgo.
The U.S. Commerce Department also considered adding Sophgo to the U.S. blacklist. Later, the U.S. added over 20 Chinese companies, including Zhipu AI, which specializes in developing large language models, and Sophgo.
Those steps show how the probe extends beyond one component. It involves advanced chips, Chinese customers, AI processors, and the compliance obligations of a major contract manufacturer.
- TSMC may face a fine of $1 billion or more.
- The investigation concerns a chip allegedly used in Huawei's Ascend 910B AI processor.
- TechInsights found a TSMC-based chipset inside Huawei's 910B AI processor, per Reuters.
- Sophgo denied direct or indirect business dealings with Huawei.
- TSMC says it has not supplied Huawei since mid-September 2020.
The broader supply chain lesson
The case highlights a hard problem in the AI chip market: advanced processors are built from multiple components, and those components can pass through layered supplier relationships before reaching a final product.
For regulators, that creates the challenge of tracing controlled technology across companies and products. For chipmakers, it raises the pressure to monitor customers, investigate potential issues, and communicate with authorities when questions emerge.
For the AI industry, the TSMC-Huawei investigation is a reminder that hardware supply chains are now part of the geopolitical and regulatory landscape. The outcome could shape how major chip manufacturers manage advanced chip shipments to Chinese firms under U.S. export controls.