The United States Commerce Department has reportedly initiated an investigation into Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chip manufacturer, to determine if it has violated U.S. export controls by supplying smartphone and artificial intelligence (AI) chips to the sanctioned Chinese telecommunications giant, Huawei Technologies.
The investigation stems from the discovery of advanced Kirin 9000S chips in Huawei’s latest smartphone models, prompting concerns over compliance with stringent export regulations imposed by the U.S. government in recent years.
A primary focus of the investigation is centered around the Kirin 9000S chips found in Huawei’s Mate 60 smartphones, launched in August 2023. This launch coincided with U.S. Commerce Secretary Gina Raimondo’s diplomatic visit to China, making the discovery of the chips particularly controversial. The key question for U.S. authorities is whether these advanced chips, which are critical to Huawei’s smartphone and AI capabilities, were produced by TSMC and shipped after the September 2020 deadline set by the U.S. for halting such shipments to Huawei.
Huawei, which has been a long-time client of TSMC, had previously relied on the Taiwanese company to produce its Kirin chips, a crucial component of its smartphones. The U.S. investigation also aims to determine whether TSMC is involved in manufacturing Huawei’s Ascend processors, which are central to the Chinese company’s AI development.
According to The Information, the U.S. Commerce Department has reached out to TSMC to verify if the company is directly or indirectly supplying Huawei with components, despite the stringent export restrictions that were put in place to limit Huawei’s access to critical U.S.-origin technology.
In response to the probe, TSMC issued a statement emphasizing its commitment to abiding by U.S. laws and international regulations. “We are a law-abiding company,” the company declared. “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.”
Despite these reassurances, the U.S. government appears keen on scrutinizing whether TSMC, knowingly or unknowingly, continued its business with Huawei after the 2020 sanctions went into effect. While the investigation is still in its early stages, it raises significant questions about the semiconductor supply chain’s complexity and the difficulty of fully enforcing export restrictions in the globalized tech industry.
The current investigation comes after several years of escalating tensions between the U.S. and China, particularly over technology and intellectual property. Huawei, a global leader in telecommunications and 5G technology, has been at the center of this conflict. In May 2019, the U.S. Commerce Department placed Huawei and 70 of its affiliates on the Entity List, effectively banning U.S. companies from selling or exporting critical technology to Huawei without a special license. The sanctions were imposed over national security concerns, with U.S. officials alleging that Huawei’s close ties to the Chinese government posed a risk of espionage and cyber threats.
Following the initial sanctions, TSMC ceased producing chips for Huawei’s HiSilicon division, the unit responsible for designing Huawei’s Kirin processors. The deadline for TSMC to halt all shipments to Huawei was set for September 2020. At that time, TSMC had been Huawei’s most important partner in producing advanced chips. Despite the cutoff, some Chinese media reports have speculated that a large volume of Kirin 9000 chips were delivered to Huawei just before the sanctions took full effect.
The recent unveiling of Huawei’s Mate 60 Pro smartphone reignited suspicions that TSMC may have continued to produce or supply chips to Huawei. The Kirin 9000S chip, found inside the new phones, is believed to be a variant of the Kirin 9000 chip, a 5-nanometer chip previously made by TSMC for Huawei. This discovery raised alarms in Washington, where concerns about Huawei’s ability to circumvent U.S. sanctions have been growing.
The U.S. Commerce Department’s investigation will examine whether any of the chips from TSMC’s “last shipment” to Huawei—estimated at 30 million units of the Kirin 9000—were shipped after the September 2020 deadline, in violation of U.S. export control laws. If this is the case, TSMC could face severe penalties, including fines and restrictions on its business operations.
The relationship between TSMC and Huawei has long been one of mutual benefit. For years, TSMC manufactured many of Huawei’s most advanced chips, helping the Chinese tech giant establish itself as a global leader in smartphones and telecommunications equipment. However, after the U.S. imposed its sanctions, TSMC was forced to sever its ties with Huawei, leaving the latter scrambling to find new chip suppliers.
In an October 2023 article, a Chinese technology columnist reflected on the breakup between TSMC and Huawei, arguing that it could ultimately benefit both companies. “The duo were close partners in the past. But now TSMC has decided to expand its investment in the U.S. and leave Huawei alone,” the columnist wrote, suggesting that Huawei might be forced to become more self-sufficient in chip manufacturing.
The columnist also pointed out that Chinese semiconductor companies are still struggling to catch up to TSMC, partly due to their inability to acquire advanced lithography machines like those from Dutch company ASML, which are essential for producing cutting-edge chips. “Without these machines, it’s difficult for Chinese companies to produce chips that can compete with TSMC’s 5-nanometer and smaller nodes,” the writer noted.
The U.S. investigation comes at a time when TSMC is heavily investing in the United States. As part of its strategy to diversify its production capabilities and reduce reliance on its Taiwan operations, TSMC is building two state-of-the-art chip fabs in Arizona. The first fab is set to begin production of 4-nanometer chips in 2024, while the second fab will focus on producing 2-nanometer and 3-nanometer chips by 2028. TSMC has also announced plans to build a third fab in the U.S. by 2030.
These investments are part of a broader trend encouraged by the U.S. government’s CHIPS and Science Act, which aims to bolster domestic semiconductor manufacturing and reduce dependence on foreign suppliers. In line with this, the U.S. government has offered substantial financial incentives to companies like TSMC and its partners, including Amkor Technology, a key player in chip packaging and testing.
In July 2023, the U.S. Commerce Department signed a memorandum of understanding with Amkor, outlining a potential $400 million in direct funding to support the company’s expansion in Arizona. Amkor, which is based in the U.S. but has significant operations in Asia, is the world’s second-largest outsourced semiconductor assembly and test (OSAT) company. The collaboration between TSMC and Amkor in Arizona is seen as a strategic move to integrate the entire chip manufacturing process—design, fabrication, packaging, and testing—within the U.S., allowing companies like Apple and GlobalFoundries to produce high-end chips domestically.
As the limits of Moore’s Law—where the number of transistors on a chip doubles every two years—approach, industry experts believe advanced packaging technologies will drive the next wave of semiconductor innovation. This trend is crucial for AI chip development, which demands higher processing power and performance.
TSMC and Amkor are expected to leverage their partnership to meet the growing demand for AI chips, particularly as companies around the world race to develop AI technologies for everything from autonomous vehicles to natural language processing systems. The U.S. government has made it clear that it views AI as a critical area of technological competition with China, and the TSMC-Amkor collaboration could be a key element in maintaining U.S. leadership in this field.
The U.S. Commerce Department’s investigation into TSMC’s potential violation of export controls regarding Huawei highlights the ongoing complexities in global semiconductor supply chains. As tensions between the U.S. and China continue to simmer, the outcome of this probe could have far-reaching implications not only for TSMC and Huawei but also for the broader tech industry.
