TSMC might have to fork over $1 billion to the US for allegedly breaking export rules after one of its chips was found in a Huawei processor

TSMC, the world's biggest chip maker, could potentially be on the hook for $1 billion or more according to Reuters which cites "two people familiar with the matter… who requested anonymity because they were not authorized to speak publicly about the matter." And although $1 billion isn't make-or-break for TSMC, it's hardly chump change, either.

This fine will reportedly be in the form of a settlement the semiconductor giant will have to pay as a result of the US Department of Commerce's alleged investigation into whether it has broken export rules by making chips that end up in Chinese company Huawei's hands.

Late last year, TSMC reportedly notified the US that a Huawei product (the Ascend 910B AI processor) contained a TSMC chip. Not long after, the government put computing design company Sophgo on the frighteningly named 'Entity List' for being an intermediary between TSMC and Huawei, possibly without TSMC's knowledge.

Huawei was already on this list, so US companies already required a licence to export to Huawei, and now exporting to Sophgo requires a licence, too. TSMC is required to adhere to these restrictions because some of its machines and equipment are US-made.

If these sources are correct, it looks like the US government has been investigating the matter and might have found TSMC to be in breach of these export restrictions. Though, of course, even if the company was in breach, it might not have been intentional.

According to Reuters' sources, the $1+ billion fine "comes from export control regulations allowing for a fine of up to twice the value of transactions that violate the rules."

According to TSMC's Nina Kao, the company hasn't given Huawei anything since 2020. The $1+ billion fine could apparently be in the form of a "charging letter" that would give the company time to respond—so even if the sources are correct, it looks like it might not be a done deal just yet.

Speaking more broadly, now, although TSMC might have recently announced $100 billion worth of investments in the US, this doesn't put it beyond the reach of export restrictions. And Trump's recent strong-arm diplomacy certainly shouldn't give TSMC any ideas otherwise.

We'll have to wait for official word from the US Commerce Department or TSMC to say anything for certain.