The issue is a TSMC-made chip ended up inside a Huawei processor. They’re not allowed to make chips for Huawei or other US-sanctioned entities since they use US tech inside their foundries.

What happened here is that TSMC made chips for another Chinese company that gave them to Huawei (and is now on the sanctioned list as well as a result, but wasn’t when TSMC made the chips). The problem for TSMC is if the US determines they should have reasonably known there was a risk the company they made the chips for would give them to Huawei.