[News] U.S. Reportedly Investigates TSMC on whether It Manufactured AI or Smartphone Chips for Huawei

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After posting record high profit in the third quarter and seeing healthy growth in the next five years, TSMC may now be facing another unexpected challenge, as the U.S. Commerce Department is reportedly probing the foundry giant to determine if it has manufactured smartphone or AI chips for Huawei, according to The Information.

According to sources cited by the report, the investigation is still in its early stages. It is unclear how long it will take the department to gather sufficient information and reach a conclusion.

If the U.S. Commerce Department determines that TSMC violated export regulations in its dealings with Huawei, the company could face fines or harsher consequences, such as temporary restrictions on accessing U.S. technology, according to The Information.

The ongoing investigation is examining whether TSMC has been engaged in the production of AI chips designed by Huawei, according to the report. These AI server chips have gained popularity among Chinese customers as an alternative to NVIDIA’s chips, which they are barred from purchasing due to U.S. export regulations.

Additionally, the inquiry is said to be exploring whether TSMC manufactured smartphone chips for Huawei’s devices as well. The Information notes that Huawei’s Mate 60 series, featuring a processor made in China by SMIC, was a potential target of investigation.

In 2020, the U.S. Commerce Department has significantly broadened Huawei’s blacklisting in an effort to limit the company’s access to foreign semiconductor chip sales, banning it from purchasing chips made with U.S. technology due to national security concerns.

Citing sources with direct knowledge to the matter, The Information notes that the department reached out to TSMC recently to inquire about any indirect sales to Huawei, possibly conducted through intermediary companies under different names. On the other hand, it is reportedly examining whether TSMC performed adequate due diligence, such as know-your-customer checks, before processing orders.

The investigation, for sure, would be politically sensitive due to TSMC’s global significance as a key supplier to U.S.-based tech giants like Apple and NVIDIA, the report points out.

It is worth noting that the Biden administration is scheduled to provide a USD 6.6 billion subsidy to TSMC, supporting the company’s efforts to build its third fab in Arizona, USA, with total investment rising to USD 65 billion.

TSMC Arizona’s first fab is on track to begin production leveraging 4nm technology in first half of 2025. Its second fab will produce 2nm process with next-generation nanosheet transistors in addition to the previously announced 3nm technology, with production beginning in 2028. The third fab will produce chips using 2nm or more advanced processes, according to TSMC.

According to Reuters, TSMC responded on Friday by stating that it was a law abiding company and committed to complying with laws and regulations, including export controls.

“If we have any reason to believe there are potential issues, we will take prompt action to ensure compliance, including conducting investigations and proactively communicating with relevant parties including customers and regulatory authorities as necessary,” noted TSMC, according to the emailed statement cited by Reuters.

Citing a previous report by AnandTech, The Information notes that TSMC has confirmed that it had stopped processing new orders from Huawei in May, 2020.

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(Photo credit: TSMC)