U.S. regulations threaten major player TSMC amidst tariff blitz - April 25th, 2025

While enforcement of the Trump administration’s sweeping new tariffs is temporarily on hold, the semiconductor industry is facing a dual-sided threat. Washington has announced plans to impose new tariffs specifically targeting semiconductors in the coming days in a bid to shift manufacturing back to American soil.  

Meanwhile, TSMC, the world’s most advanced chipmaker, is under investigation for alleged export control violations after its technology was found in Huawei’s AI products. While TSMC is complying with regulatory bodies and denies any breach of trade policy compliance, it still faces an eye-watering $1 billion fine.  

Together, these developments signal a sharp turn in U.S. trade policy and enforcement that no player in the semiconductor ecosystem can afford to ignore.  

Trump’s Escalating Tariffs on Semiconductors

The Trump administration is reportedly mulling new tariffs aimed at the semiconductor industry that it plans to announce “very soon.” Citing a desire to bolster domestic chip manufacturing and address trade imbalances, the incoming tariffs would be the latest in a chaotic unleashing of new trade regulations over the past month.  

Thus far, semiconductors have largely avoided the tariffs placed on virtually every nation around the world. However, experts fear this trend won’t continue much longer. Trump’s proposed chip tariffs, which could reach up to 20%, will affect a wide range of electronics, including everything from consumer devices to AI data centers.  

Smartphones and computers, among other devices, have been temporarily exempted from existing tariffs, but the administration has indicated that it intends to revisit these rulings within the scope of national security investigations.  

Industry leaders have expressed concern over the potential disruptions chip tariffs would cause. Increased production costs and supply chain bottlenecks are among the primary worries, as companies around the world may need to reevaluate their manufacturing and sourcing strategies. The uncertainty surrounding the tariffs has already led to market volatility, with companies like Nvidia and Apple reporting significant financial impacts.  

In response to the impending tariffs, companies are exploring myriad options to mitigate risk. Strategies include relocating production facilities to the United States, diversifying supply chains, and investing in offshore manufacturing. Nvidia has announced plans to produce up to $500 billion of AI chips in the U.S. Meanwhile, TMSC announced in March its intentions of spending $100 billion to expand its U.S. production capacity.  

Even so, of the 105 new chip fabs set to come online by 2028, just 15 are planned for the United States, according to SEMI.  

Over the coming months, the chip industry will continue to hold its breath as the fallout of Trump’s tariffs comes into focus. Companies must remain vigilant and proactive in adjusting their strategies to maintain competitiveness in a shifting global market. Engaging with distributors like Sourceability can offer businesses trade compliance expertise and market intelligence tools to help adapt to the changing landscape.  

TSMC Under U.S. Regulatory Fire—A $1 Billion Dilemma

As the broader semiconductor industry braces for Trump’s tariffs, another storm is brewing for TSMC. The world’s most advanced chipmaker now finds itself in the crosshairs of a U.S. Department of Commerce investigation that could result in more than $1 billion in fines.  

At the center of the controversy is a TSMC die found in the high-performance Huawei 910B AI accelerator. The multi-chip system is the most advanced mass-produced AI chip available from a Chinese firm given U.S. export rules clamping down on the technology. The alleged breach first came into the spotlight last fall when a Canadian research firm called TechInsights performed a teardown of the 910B chip.  

The Commerce Department’s investigation is focused on contract work TSMC performed for Sophgo, a Chinese design firm. According to a Reuters report citing anonymous sources close to the matter, the Sophgo chip produced by TSMC “matched one found in Huawei’s high-end Ascend 910B AI processor.”  

The world’s largest chipmaker has produced nearly three million of these chips in recent years, which likely ended up in Huawei’s supply chain, according to RAND Technology and Security and Policy Center researcher Lennart Heim. Though Huawei has been subject to U.S. export controls since 2019, this latest development has reignited concerns about enforcement gaps.  

TSMC has denied any wrongdoing, claiming that it has remained fully compliant with U.S. regulations and has avoided trade with any firms on the so-called entity list. Even if TSMC’s compliance is airtight, the investigation signals a shifting regulatory posture in Washington.  

For TSMC, the implications go far beyond a financial penalty. While a billion-dollar fine is nothing to scoff at, the penalty wouldn’t devastate a company of TSMC’s size. Yet, an unprecedented 10-figure fine would set a new status quo for how export control laws are enforced, extending corporate liability to the downstream effects of global distribution.  

If the Commerce Department ultimately concludes that TSMC indirectly enabled restricted technology to reach Huawei or other Chinese firms, the legal and operational burden on every tier-one foundry and fabless chipmaker will grow exponentially.

The investigation also adds a new strain on TSMC’s customer base, which includes companies like Apple, AMD, Nvidia, and Qualcomm, who rely on uninterrupted access to TSMC’s industry-leading process nodes. A regulatory crackdown, even limited to this one incident, would burden what has long been viewed as the industry’s most reliable supply chain partner with a new level of risk.  

Any policy that threatens TSMC could force U.S. tech giants to accelerate diversification plans already in motion. Indeed, some already are. Nvidia’s recent announcement to co-located AI chip manufacturing in the U.S. shows that chipmakers are preparing for a more fragmented and compliance-heavy supply chain. However, most future U.S.-based fabs aren’t expected to come online until 2026 or later, which leaves a vulnerable transition window that will likely expose systemic weaknesses.  

The TSMC investigation should serve as a warning to companies across the semiconductor ecosystem. Partnering with a firm like Sourceability—whose global sourcing infrastructure and market intelligence tools are built with compliance and risk mitigation at their core—can help OEMs and chipmakers alike navigate this new era. Whether sourcing components, qualifying vendors, or forecasting political risk, trusted intermediaries are becoming essential to protect both operations and reputations.

With more tariffs on semiconductors expected in the coming weeks and export controls becoming more punitive, even industry leaders will be tested. The full ramifications of rising geopolitical tensions and harsh trade enforcement may only become clear in the quarters ahead.