TSMC, known as the world’s largest semiconductor manufacturer, may face a significant penalty of $1 billion or more for allegedly breaching U.S. export regulations. This situation arises from reports that some of TSMC’s chips were located in a processor used by Huawei, a prominent Chinese tech corporation.

While a fine of this scale isn’t likely to cripple TSMC, it’s still a notable amount. The proposed settlement comes in light of investigations by the U.S. Department of Commerce regarding TSMC’s export practices, specifically whether the company violated any rules by supplying chips that have reached Huawei.

In late 2024, TSMC informed the U.S. government after discovering that one of its chips was included in the Ascend 910B AI processor made by Huawei. Subsequently, the government placed computing design firm Sophgo on a restrictive list for allegedly acting as a middleman between TSMC and Huawei without the former’s knowledge.

TSMC must comply with these restrictions due to the American origin of many of the tools and equipment it uses. If reports are accurate, the U.S. government has been scrutinizing TSMC and might have determined that the company breached export laws—whether intentionally or not.

The $1 billion fine derives from laws regarding export control, which indicate that violators may be fined up to twice the value of transactions that contravene the regulations. TSMC has stated through its representative, Nina Kao, that the firm has not provided Huawei with any products since 2020. The potential settlement may take the form of a ‘charging letter,’ which would allow TSMC time to respond before any final decision is made.