tsmc faces $1 billion export control fine

2025-04-09 tsmc

washington d.c., Wednesday, 9 April 2025.
Taiwan Semiconductor Manufacturing Company faces scrutiny. The U.S. Department of Commerce is investigating potential export control violations. The issue revolves around chips manufactured for Sophgo, a China-based firm. These chips may have been diverted to Huawei’s AI processors. The penalty could reach or exceed $1 billion. This situation could significantly affect tsmc’s financial health and stock performance. The investigation highlights the complexities of global chip supply chains and the enforcement of export regulations.

Investigation details

The U.S. Department of Commerce is investigating TSMC’s dealings with Sophgo, a Chinese chip design firm [2][7]. The core issue is that chips manufactured by TSMC for Sophgo allegedly found their way into Huawei’s Ascend 910B AI processor [2][5]. Huawei is on a U.S. trade blacklist, restricting its access to goods made with U.S. technology [7]. TSMC’s chipmaking equipment includes U.S. technology, subjecting its Taiwan-based factories to U.S. export controls [2][6]. This prevents TSMC from directly supplying Huawei or producing advanced chips for Chinese clients without U.S. licenses [2].

Potential financial impact

The potential penalty of $1 billion or more stems from export control regulations [2][7]. These regulations allow fines up to twice the value of the transactions that violated the rules [2][6]. A fine of this magnitude could significantly impact TSMC’s financial outlook [5]. TSMC’s shares have already shown sensitivity to this news [4]. Shares of TSMC have dropped by over 12% since April 7, 2025 [4]. The stock’s reaction underscores investor concerns about the financial and reputational damage from the investigation [alert! ‘precise stock values unavailable’].

Geopolitical implications

This investigation occurs during a tense period in U.S.-Taiwan relations [6]. The U.S. recently imposed a 32% tariff on imports from Taiwan [4][6]. While these tariffs exclude chips, further levies on semiconductors are under consideration [6]. This situation adds complexity to TSMC’s operations, as it navigates both U.S. export controls and evolving trade policies [9]. The intersection of trade restrictions, technology, and geopolitics places TSMC in a precarious position [6].

Company response and actions

TSMC has stated that it suspended shipments to Sophgo in the fall of 2024 [4]. The company also maintains that it has not supplied Huawei since mid-September 2020 [4][9]. TSMC is cooperating with the U.S. Department of Commerce in the investigation [9]. In March 2025, TSMC announced a $100 billion commitment that included plans for five new chip facilities in the U.S. [4]. This investment could be seen as a move to strengthen ties with the U.S. and mitigate concerns about its operations [alert! ‘causal link not explicitly stated in source’].

Expert opinions and market analysis

Lennart Heim, a researcher at RAND, suggests TSMC should have avoided manufacturing chips for Sophgo due to the risk of diversion to Huawei [4]. On TipRanks, TSM has a Strong Buy consensus based on 5 Buy and 1 Hold rating [9]. The consensus price target for TSM is $245, implying a 68.966 or 68.97% upside [9] [alert! ‘current share price unavailable; used example of 145’]. This optimistic outlook contrasts sharply with the immediate negative impact of the export control investigation on TSMC’s stock [4].

Bronnen

export control financial penalty