A TSMC factory sign – Image credit: TSMC
Apple chipmaker TSMC is finding it harder to maintain neutrality as tensions between China and the U.S. continue to grow.
Taiwan Semiconductor Manufacturing Co (TSMC) manufactures the processors in Apple’s iPhones, iPads, and Macs. Apple has been its lead customer since 2014 when it began manufacturing the A8 chip in the iPhone 6 and iPhone 6 Plus.
However, TSMC’s relationship with U.S.-based companies has strained in recent years. In October, the U.S. Department of Commerce began an investigation into a possible sanctions breach by TSMC.
The sanctions in question include a block in enacted in 2020, designed to prevent Huawei from accessing components from U.S. companies without prior approval. The United States introduced additional controls in 2022 that severely restrict any exports of AI chips to China.
TSMC, for its part, would much rather remain neutral, acting as “a semiconductor version of Switzerland”, a TSMC executive told The Information points out. Unfortunately for TSMC, it’s only getting harder to do so.
It’s possible that TSMC was contracted by an intermediary firm that concealed Huawei as its client. The customer attempted to order a chip with a similar design to the Ascend 910B, a processor developed by Huawei. Notably, the chip was designed to train large language models, a crucial process in AI production.
As a result, TSMC has spent weeks conducting an internal investigation of its Chinese customer base in an attempt to identify any suspicious orders. The company has stopped supplying clients with questionable chip orders and has even gone so far as to destroy any suspect wafers.
However, TSMC is also concerned about damaging its relationship with China. After all, it operates two factories in China that produce chips for numerous clients in the region. If the Chinese government intervenes, it would likely have lasting impacts on both TSMC’s profits and the entire semiconductor industry.
When asked by Chinese officials about the U.S. investigation, TSMC told them that the U.S. calls the shots, sources told The Information. However, it assured China that it would only do what U.S. regulators required and nothing more.
Ultimately, because 65% of its revenue comes from American clients, namely Apple and Nvidia, TSMC’s hands are tied. The company hopes to avoid heavy fines by proving how challenging it is to identify suspicious clients, while showing its commitment to the U.S. by cooperating with all probes.
It’s possible that through the cooperation, the U.S. Department of Commerce could show the company some leniency.
“The level of cooperation between the company and [the] BIS, if the company has been suspected of a violation, can make a big difference in how they are penalized or whether they are penalized down the road,” Jacob Feldgoise, a data research analyst at Georgetown University’s Center for Security and Emerging Technology told The Information.
