[Taiwan Chip News] Did China Collaborate on AI Development? TSMC Faces $1.5 Trillion Fine Risk in the US

TSMC Chips Suspected of Being Ordered for Huawei Production
US Department of Commerce Investigating Related Allegations
Fines Imposed for Violating Export Control Regulations
US Continues to Restrain TSMC Despite Increased Investment

TSMC, the world's No. 1 foundry (semiconductor contract manufacturing) company, is facing a situation where it may be fined a huge amount by the U.S. government. The U.S., which is encouraging investment expansion worldwide through the 'tariff imposition' card, appears to be strengthening pressure to check Taiwan, a semiconductor powerhouse, and TSMC.

According to major foreign media including Reuters on the 11th, the U.S. Department of Commerce is reportedly investigating suspicions that Chinese semiconductor design company Sophgo placed chip production orders with TSMC on behalf of Chinese company Huawei since last year. Earlier, on the 8th (local time), Reuters reported that chips manufactured by TSMC were confirmed to be included in Huawei's artificial intelligence (AI) processors, and the U.S. government could impose fines exceeding $1 billion (about 1.4845 trillion KRW).

Huawei's Ascend 910B, released in 2023, is known as the most advanced mass-produced AI chipset in China. Foreign media and industry analysts believe this chip was used in AI models of DeepSea and Ant Group, a fintech affiliate under Alibaba. Sophgo was included in the U.S. Department of Commerce's export control list in January, meaning it cannot trade advanced technologies or products involving U.S. technology without U.S. government approval. However, if it is confirmed that Huawei manufactured chips at TSMC through Sophgo, it means TSMC, which uses U.S. equipment and technology, cooperated in China's AI development.

According to Renate Heim, a researcher at the Center for Technology and National Security Policy of the U.S. think tank RAND Corporation, TSMC has manufactured nearly 3 million chips ordered by Sophgo in recent years. Under U.S. export control regulations, violators must pay fines amounting to twice the value of the transactions made in violation of the rules. However, industry insiders also analyze that there may be no procedural issues. TSMC denied the allegations in a statement, saying, "TSMC has complied with the law and has not supplied semiconductors to Huawei since mid-September 2020."

As the controversy grew, combined with the U.S. tariff bomb, TSMC's stock price fell below 800 yuan (about 158,000 KRW) on the 9th, closing at 785 yuan (155,000 KRW), down about 31 yuan, marking the lowest point in the past year. Its market capitalization also dropped to 20.36 trillion yuan (4,037.9 trillion KRW).

Amid ongoing Chinese containment by the Trump administration, this incident is also interpreted as a move to pressure TSMC using it as a pretext. Analysts suggest that the U.S. government is imposing substantial fines on TSMC as a negotiation card for imposing import tariffs on Taiwan and expanding investment in TSMC's semiconductor facilities. The U.S. government recently decided to impose a 32% tariff on Taiwan. Although semiconductors are currently not included in the tariff targets, tariff imposition is anticipated in the future.

Recently, TSMC has been increasing its investment in the U.S., but U.S. government containment continues. Last month, TSMC Chairman Wei Zhejia announced after meeting with President Trump that the company would invest an additional $100 billion (148 trillion KRW) in U.S. semiconductor plants over the next four years. However, U.S. President Trump emphasized on the 8th, "I did not give money to TSMC, and there was no stupid semiconductor law," adding, "I only said that if they don't build factories here (in the U.S.), they will have to pay 25%, 50%, or maybe 100% tariffs."

Despite U.S. containment, the semiconductor industries in China, Taiwan, and others are rapidly growing. China's chip self-sufficiency rate has risen from less than 10% ten years ago to 25% currently, and chip export value surpassed 1 trillion yuan (197 trillion KRW) for the first time as of November last year. TSMC also announced that its sales in the first quarter of this year reached about 35 trillion KRW, a 41.6% increase compared to the same period last year.

Taiwan Economic Daily News = Reporter Yoon Hyejung

Translation = Asia Economy

※ This column is published through a strategic partnership between Asia Economy and Taiwan Economic Daily News.