The U.S. Commerce Department is launching an investigation into Taiwan Semiconductor Manufacturing Co. (TSMC) to determine whether the company has been manufacturing chips for Huawei, one of China’s largest tech companies. This probe is a significant move as it could highlight potential violations of existing U.S. export restrictions placed on Huawei since 2020.
Scrutiny on AI and Smartphone Chip Production for Huawei
At the core of the investigation is whether TSMC has been producing artificial intelligence or smartphone chips for Huawei. If proven, this would breach U.S. export rules, particularly those related to national security concerns. Since 2020, Huawei has been under intense scrutiny, and the U.S. government has imposed various sanctions, including a ban on the company from purchasing chips made with U.S. equipment. The ban also extends to Huawei’s use of U.S. technology in developing its own chips, which requires explicit approval from the Commerce Department.
TSMC Denies Allegations, Reaffirms Compliance
In response to the allegations, TSMC has firmly denied any involvement in producing chips for Huawei. The company emphasized its commitment to adhering to international laws and regulations, particularly U.S. export controls. TSMC stated that it proactively monitors and evaluates any potential compliance issues.
“If we have any reason to believe there are potential issues, we will take prompt action to ensure compliance, including conducting investigations and communicating with relevant parties, including customers and regulatory authorities as necessary,” the company said in a statement.
Context of the U.S. Restrictions on Huawei
The investigation comes against the backdrop of the U.S. government’s long-standing concerns over Huawei’s ties to the Chinese government. These concerns center on the potential for Huawei’s technology to be used in ways that threaten U.S. national security. Huawei has faced several restrictions, including bans on acquiring technology developed with American resources. Over the past few years, these measures have greatly limited Huawei’s access to key components and technology necessary for its smartphones and other devices.
Despite the restrictions, Huawei has managed to make progress in its chip manufacturing efforts, thanks in part to its collaboration with SMIC, another Chinese semiconductor company. This development has further heightened concerns in the U.S. over Huawei’s potential circumvention of existing sanctions.
TSMC’s Market Performance Amid the Probe
While TSMC is under investigation, the company’s financial performance remains robust. TSMC shares hit a record high recently, boosted by better-than-expected third-quarter earnings. This surge in performance elevated the company’s market capitalization to $874 billion, making it the most valuable publicly traded company in Asia. Despite the investigation, investor confidence in TSMC remains strong.
What’s Next for TSMC and Huawei?
The outcome of this investigation could have significant implications for both TSMC and Huawei. If the U.S. Commerce Department finds that TSMC violated export regulations, it could lead to further sanctions or restrictions on the company, affecting its operations and partnerships globally. As Huawei continues to make strides in its processor development, the U.S. government is likely to maintain a close watch on any further dealings between the two companies.
The situation is evolving, and more information is expected to emerge in the coming weeks. Both companies are under intense scrutiny, and their responses will likely play a critical role in shaping the next steps.
