From Export‑Control Hurdles to Tariff Probes: The Supply Chain in Turmoil - May 2nd, 2025

With semiconductors at the center of heated discussions, chip firms are facing intensifying pressure to enforce U.S. export controls. TSMC finds itself entangled in this battle seemingly at every turn, despite its protestations of having limited visibility into how its silicon is used downstream. The world’s largest chipmaker points to Huawei’s recent acquisition of its AI chip technology through intermediaries as an example of the regulatory nightmare it faces—and the serious consequences it could receive.  

Meanwhile, the U.S. Commerce Department has launched a Section 232 investigation into semiconductor imports. The move paves the way for more potential tariffs on a broad range of electronics and materials critical to chipmaking in the coming months.  

Together, these developments underscore the critical need for chip industry players to prioritize end-to-end compliance, transparency, and flexibility in their operations if they want to avoid disruption.  

TSMC Tries to Follow Stringent U.S. Demands on AI Chips

As the world’s most advanced chip foundry, TSMC often finds itself in the crosshairs of U.S. export control policies. In TSMC’s latest annual report, the company raised a red flag regarding a critical blind spot that could cause it to unintentionally run afoul of American trade regulations. The Taiwan-based firm argues it has limited visibility into how its customers deploy or re-export the chips it fabricates, particularly AI hardware being diverted to Chinese firms like Huawei.  

TSMC’s business model, built entirely on foundry production, is designed to be hands-off post-production. Clients provide their designs, TSMC manufactures and ships them. But in the current geopolitical landscape and a global race for AI superiority, that model is now causing problems.  

The latest TSMC report specifically calls out Huawei, a member of the U.S. Entity List, as having procured AI silicon made in its foundries through intermediaries. A TSMC die found in Huawei’s 910B AI accelerator, the most advanced mass-produced chip available from a Chinese firm, likely originated from contract work TSMC performed for Sophgo, another Chinese company. TSMC produced some three million of these chips in recent years, and now faces potential fines of more than $1 billon.  

Post-production movements of advanced silicon pose both national security issues from the perspective of the U.S. and a regulatory nightmare for TSMC. The latter warns that its inability to track downstream usage could result in significant consequences for its business, including additional regulatory fines, reputational harm, and even having critical export licenses revoked.

TSMC urges the industry to move beyond siloed compliance and embrace shared responsibility across the supply chain. For chipmakers to avoid unwanted consequences sparked by downstream usage, logistics partners, distributors, and OEMs must collaborate to ensure end-use and end-user transparency. This means maintaining strict audit trails that go beyond check-the-box compliance—a rare practice outside the aerospace, defense, and other highly regulated industries.  

For semiconductor firms caught in this new compliance crossfire, and those hoping not to be, digital audits and proactive verification mechanisms are now essential. That’s where platforms like Sourceability come in. By offering real-time supply chain visibility, automated documentation, and a robust screening infrastructure, Sourceability equips companies to identify export control gaps before regulators do. This enables foundries and fabless players alike to pivot from reactive to proactive compliance in a market where airtight adherence to changing regulations becomes more difficult every day.  

Semiconductor Tariffs Will Be Determined After U.S. Probe

The semiconductor industry is bracing for another wave of geopolitical upheaval, and this time electronics are squarely in the crosshairs. This comes as the U.S. Commerce Department recently launched a Section 232 investigation into imports of semiconductors, fabrication equipment, and derivative products. Regulators will also examine assets critical to the chip industry, including substrates, bare wafers, legacy components, and SME components.  

The probe, triggered under the banner of national security, is a precursor to new tariffs that could go far beyond the sweeping rules enacted in the Trump administration’s first 100 days. To this point, semiconductors have dodged the worst of the president’s national security driven levies. However, that stroke of luck is unlikely to persist. The forthcoming tariffs are expected to cover smartphones, laptops, and a broad range of electronic devices reliant on advanced components.  

Should finished downstream products fall under the Section 232 investigation, buyers will face import duties based on the value of their incorporated semiconductors.

Commerce Secretary Howard Lutnick has indicated that his department’s report will lay the groundwork for tariffs on semiconductors that President Donald Trump previously promised. As part of the investigation, the industry now has an opportunity to weigh in during a 21-day comment window. Industry players are encouraged to offer feedback on issues surrounding semiconductor imports, including demand and production capacity, foreign dependence, and domestic expansion.  

However, the Trump administration has made it clear that exceptions will be limited, and enforcement will be far-reaching. Likewise, while some products may escape reciprocal duties, they may still be subject to national emergency tariffs.  

The Commerce Department’s latest investigation is a strong signal the U.S. government views the semiconductor industry as a strategic national asset rather than a commercial concern. Statements from the Trump administration suggesting new tariffs across the entire electronics supply chain also indicate a departure from previous policy frameworks. Until now, most trade rules have exempted consumer devices and derivative goods from direct semiconductor taxes.

Implications of the forthcoming tariffs for semiconductor companies and their downstream partners are profound. Even organizations with minimal exposure to countries like China, where tariffs could top 100%, must reevaluate how chips and components move through the global supply chain. A misstep in country-of-origin labeling or documentation could mean unexpected duties and margin erosion.

In this climate, transparent data and compliance tracking are more important than ever. Sourceability enables businesses to anticipate tariff exposure at every point in their supply chain with robust trade compliance analytics and country-of-origin tracking. Likewise, customers can leverage Sourceability’s global distribution network to route goods through more favorable jurisdictions or adjust sourcing strategies in real time based on the evolving tariff landscape.  

As the Trump administration’s promised semiconductor tariffs inch closer to reality, companies must act now to secure their procurement flow. The ability to make fast, intelligent pivots backed by real-time supply chain data and proactive documentation will define success in the coming months.