Chip maker Taiwan Semiconductor Manufacturing (TSM) is reportedly in line for a $1 billion or more fine for breaking U.S. export controls on the sale of technology to China. The news left its shares flat today.
According to a report on Reuters the U.S. export control investigation centers around a chip TSMC made that ended up inside a Huawei AI processor.
Huawei Link Investigated
Reuters sources stated that the U.S. Department of Commerce has been investigating TSM’s work for China-based Sophgo. The design company’s TSMC-made chip matched one found in Chines tech firm Huawei’s high-end Ascend 910B artificial intelligence processor.
Huawei, which is at the center of China’s AI chip drive, is on a U.S. trade list that restricts it from receiving goods made with U.S. technology. The report stated that TSMC has made nearly three million chips in recent years that matched the design ordered by Sophgo and likely ended up with Huawei.
The $1 billion-plus potential penalty comes from export control regulations allowing for a fine of up to twice the value of transactions that violate the rules. Even though TSMC is based in Taiwan, its chipmaking equipment includes U.S. technology. That brings it under those export controls which prevent it from making chips for Huawei, or producing certain advanced chips for any customer in China without a U.S. license.
Tricky Taiwan Ties
The potential fine comes at a sensitive time for U.S. and Taiwan relations following President Trump’s imposition of a 32% levy on imports from Taipei. Although the tariffs exclude chips, the U.S. is said to be looking at levies on semiconductors.
TSMC is also planning to invest huge sums in the U.S. to build new chip making plants. On top of that is the geopolitical tension between the U.S. and China and what that could mean for the security of Taiwan.
TSMC told Reuters that it had not supplied to Huawei since mid-September 2020 and that they are cooperating with the Commerce Department.
Is TSM a Good Stock to Buy Now?
On TipRanks, TSM has a Strong Buy consensus based on 5 Buy and 1 Hold rating. Its highest price target is $265. TSM stock’s consensus price target is $245 implying an 67.96% upside.
