Taiwan Semiconductor Manufacturing Company (TSMC) is under investigation by the U.S. Department of Commerce over its involvement in producing a chip used in Huawei's Ascend 910B AI processor. The investigation stems from TSMC's manufacturing of nearly 3 million chips for Sophgo, a China-based company, with the potential for these chips to be supplied to Huawei, which is on the U.S. trade blacklist. This violation could lead to a fine of over $1 billion, based on U.S. export control laws, which impose penalties up to twice the value of the transactions involved.

TSMC, which uses U.S. technology in its manufacturing process, is restricted from supplying chips to Huawei or any Chinese entity without a special U.S. license. Despite TSMC's cooperation with the investigation and halting shipments to Huawei in 2020, the company faces scrutiny over its role in producing AI-focused chips potentially diverted to restricted entities like Huawei.

The potential fine and investigation come at a sensitive time in U.S.-Taiwan relations, with growing concerns over China's access to advanced technologies. TSMC's future in the U.S. market, including its $100 billion investment in U.S. chip facilities, remains uncertain as officials push for stricter enforcement of export control violations.