### US Investigates TSMC's Alleged Role in Huawei AI Chip Development

The United States Department of Commerce has initiated an investigation into the Taiwan Semiconductor Manufacturing Co. (TSMC) amid allegations that the chipmaking giant may have circumvented 5G export controls to provide artificial intelligence (AI) and smartphone chips to Huawei Technologies. This development comes amidst increasing concerns over national security and technology competition between the US and China, particularly in the realm of AI and advanced semiconductor tech.

According to sources familiar with the matter, the probe aims to determine whether TSMC collaborated directly or indirectly with Huawei, a company viewed by US officials as a significant security risk since 2019. Huawei was previously accused of violating US export controls by providing financial services to Iran. The ensuing tension led the US to enact stringent tariffs and export restrictions on China's tech sector, notably impacting semiconductor access.

TSMC responded promptly to the allegations, asserting its commitment to compliance with all relevant laws and regulations, including export controls. The company emphasized its status as a law-abiding entity and suggested there is no indication it has violated the existing export controls. However, sources reveal that the US has inquired about TSMC's potential involvement in manufacturing chips for Huawei's smartphones and AI applications.

Specific concerns have arisen following Huawei's unexpected launch of the Mate 60 smartphone, which features 5G chips. Given China's technological limitations in producing such advanced chips independently, US officials suspect that TSMC may have played a role in their development. The probe is examining whether TSMC bypassed export restrictions by selling chips directly to Huawei or through intermediary companies acting on Huawei's behalf.

The stakes for TSMC are high, as the company risks hefty fines and severe penalties if found guilty of breaching export controls. Last year, Seagate faced a massive $300 million fine for shipping seven million disc drives to Huawei. Similar penalties could impose significant financial and operational constraints on TSMC, affecting its ability to procure US technology.

One critical area of concern is how this investigation could impact TSMC's involvement in the CHIPS Act funding, a substantial US government initiative aimed at bolstering domestic semiconductor production. In April, TSMC received $6.6 billion in direct funding from the CHIPS Act to support its investment in constructing three advanced semiconductor fabrication facilities in Phoenix, Arizona. These fabs are integral to the US's strategy of securing a reliable domestic supply of cutting-edge chips essential for AI and other high-tech industries.

The Department of Commerce has outlined strict guidelines to ensure that CHIPS Act funds are not used to benefit foreign adversaries like China. Any involvement of TSMC with Huawei’s AI chip manufacturing could be perceived as violating these guardrails, potentially jeopardizing the entire funding. However, given TSMC's critical role in the US semiconductor landscape, such a drastic measure seems unlikely at this stage.

As the investigation unfolds, the implications for TSMC and its partners, including tech giants like Apple, Nvidia, and Qualcomm, remain uncertain. The outcome of this probe could shape the future of US-Taiwan tech collaboration and the strategic competition with China in the AI and semiconductor sectors.