**US Investigating Possible TSMC Assistance to Huawei in AI Chip Production**
The U.S. Department of Commerce is reportedly conducting an investigation into Taiwan Semiconductor Manufacturing Co. (TSMC) amid concerns that the chip manufacturer may have breached U.S. export regulations by aiding Huawei Technologies in the creation of artificial intelligence (AI) or smartphone chips. This inquiry, still in its preliminary phase, arises during a period of increased friction between the U.S. and China, particularly concerning technological supremacy in fields such as AI and 5G.
### Backdrop of the Investigation
The U.S. has historically viewed Huawei as a national security threat, especially following claims that the Chinese tech company contravened U.S. export regulations by offering financial services to Iran. Consequently, Huawei has faced a range of restrictions, including a prohibition on accessing American-made 5G chips vital for AI applications. To further limit China’s access to cutting-edge technology, especially in the semiconductor and AI realms, the U.S. government has also instituted tariffs and additional measures.
This ongoing investigation focuses on the possibility that TSMC, the world’s largest contract chip manufacturing entity, may have evaded these limitations by directly or indirectly supplying Huawei with chips. According to sources cited by *The Information*, U.S. officials are looking into whether TSMC could have sold chips to intermediary firms that subsequently placed orders on behalf of Huawei, thereby bypassing U.S. export laws.
### TSMC’s Position
TSMC has refuted any allegations of misconduct, asserting that it operates as a “law-abiding company” dedicated to adhering to all legal requirements and regulations, including U.S. export controls. The company has highlighted that it has an export system in place to oversee and guarantee compliance with these regulations. Furthermore, TSMC has stated its intention to fully cooperate with the U.S. investigation, pledging to take immediate corrective measures if any issues are identified.
Nevertheless, the U.S. Department of Commerce has not yet officially acknowledged the investigation and has declined to provide commentary regarding the situation when contacted by multiple media outlets.
### Implications for TSMC
The stakes are significant for TSMC. Should the inquiry substantiate claims that the company assisted Huawei in obtaining U.S.-made chips, TSMC could encounter considerable repercussions, including hefty fines or restrictions on its access to U.S. technology. Such outcomes could have extensive repercussions not only for TSMC but also for its clients, which include major American companies such as Apple, Nvidia, and Qualcomm.
For instance, in a comparable case from last year, Seagate faced a $300 million fine for shipping 7 million disk drives to Huawei in violation of U.S. export controls. Given TSMC’s larger role in the global semiconductor supply chain, it could face even harsher penalties if proven guilty of similar infractions.
### Effect on the CHIPS Act and U.S. Tech Policy
The investigation also brings into question the future of U.S. collaboration with TSMC, especially regarding the Biden administration’s CHIPS Act aimed at strengthening domestic semiconductor production. In April 2024, TSMC was awarded $6.6 billion in CHIPS Act funding to facilitate investment in advanced semiconductor manufacturing facilities in Phoenix, Arizona. These facilities are anticipated to be essential in ensuring a stable domestic supply of chips for AI, consumer electronics, and other advanced-tech industries.
If TSMC is found to have contravened U.S. export regulations, its access to CHIPS Act funding could be threatened. The Department of Commerce has established stringent criteria to prevent CHIPS dollars from benefiting foreign nations of concern, including China. Violating these stipulations could lead to the reclamation of CHIPS Act funds, although such an outcome seems improbable given TSMC’s critical role in U.S. tech strategy.
### Wider Consequences for U.S.-China Tech Relations
The inquiry into TSMC represents the latest chapter in the ongoing technology competition between the U.S. and China. As both nations strive for supremacy in key technologies such as AI and 5G, the U.S. has increasingly aimed to restrict China’s access to sophisticated technology. Beyond export controls, the U.S. has implemented tariffs and passed legislation intended to prevent China from obtaining American-made AI and AI-enabling technologies.
Huawei, in particular, has been a central figure in U.S. endeavors to limit China’s technological progression. The launch of the Mate 60 smartphone by the company, featuring advanced 5G chips, raised concerns in the U.S. due to uncertainties regarding how Huawei managed to produce such chips despite restrictions on its access to U.S. technology.
If the U.S. investigation confirms that TSMC had a role in aiding Huawei in developing these chips, it could prompt even more stringent measures to restrict China’s access to advanced semiconductors. Such actions could escalate tensions between the two nations and disrupt global supply chains, especially within the semiconductor sector.
