The US Commerce Department launched the investigation, which is now considering whether TSMC (TSM, Financial) may have broken China-related sanctions. This probe may create great difficulties for leading tech such as Apple (AAPL, Financial), Intel (INTC, Financial), and NVIDIA (NVDA, Financial), which are reckoning with evading TSMC's innovative chip technologies.
It is similar to what the US did to the Chinese tech giant Huawei in 2020. The US is now worried that TSMC may have been indirectly supplying Huawei with smartphone/ AI brackets and other crucial products through arbitrage. First, TSMC admitted that although it stopped doing business directly with Huawei after the sanctions, the Commerce Department is now looking at the extent of TSMC's compliance activities.
The presuppositions of this study are enormous. If TSMC has a penalty, it will be unable to obtain important American technology and equipment, which is very important for manufacturing. This situation would be particularly disastrous to Apple since it may result in a disruption in production or a lack of popular products such as iPhones and Mac computers. Nvidia designs its chips without outsourcing this function, but it depends on TSMC for manufacturing; thus, it can also be vulnerable.
However, the probe also raises doubt over TSMC's expansion plan for a plant in Arizona. While the project is critical, as evidenced by the recent $6.6 billion subsidy under the Chips Act, sanctions could lead to stagnation, thus compromising US interests.
This finding may mean a great change in the structure of the world technology industry and a change in the existing trends in world trade and new technology cooperation. As this plays out, corporates and investors hold their breath lest they forget that TSMC is a key player in the global value chain.
