Taiwan Semiconductor Manufacturing Company (TSMC) just found itself entangled in an unexpected controversy. Around the same time that Donald Trump rattled the industry by threatening to pull $6.6 billion in federal funding if he regains the presidency, TSMC realized that some of its high-tech chips had mysteriously found their way into the hands of gasp Huawei (China’s blacklisted tech giant).

If you're wondering why everyone’s panicking, it’s because Huawei is on the U.S.’s "no-fly list" for tech partnerships. Since 2020, the Chinese firm has been banned from doing business with American companies without a special government license (part of a broader effort to keep sensitive tech out of the hands of Chinese firms with close ties to Beijing). So, the fact that Huawei somehow got their mitts on TSMC’s advanced chips is, to put it mildly, not good.

In response, TSMC immediately halted shipments to the mystery customer faster than a flash crash on Wall Street. By mid-October, they had alerted both the U.S. and Taiwanese governments. The incident sparked an internal investigation, as officials race to find out if this was some covert operation to smuggle chips to Huawei or just a client with some really bad business sense.

Now, just as TSMC is trying to figure out how their chips ended up in Huawei’s hands, Trump’s throwing fuel on the fire with his comments about yanking billions in subsidies from the company. Trump has been railing against the U.S. shelling out “billions of dollars to a wealthy foreign company” like TSMC to build chip plants in Phoenix. According to Trump, Taiwan is “immensely wealthy” and doesn’t need U.S. handouts. His not-so-subtle implication: if he gets back in the Oval Office, TSMC might have to kiss those subsidies goodbye.

Trump’s threat to pull the plug on funding has serious financial implications—$6.6 billion in grants and up to $5 billion in loans were promised to TSMC under Biden’s CHIPS Act, a law designed to bring semiconductor manufacturing back to U.S. soil. If Trump does take that money back, it won’t just be a blow to TSMC; it could mess with the entire semiconductor supply chain. And if you thought the chip shortages during the pandemic were bad, just wait.

TSMC’s Arizona project isn’t small potatoes. They’re building three fabs (chip factories) in the state, with the first expected to be operational by 2026. That’s thousands of high-paying jobs on the line, not to mention the tens of thousands of construction jobs needed to build these plants. And let’s be honest: semiconductors are in everything. From your phone to your car to, yes, even your smart toaster, the demand for these chips is insatiable. Cutting off TSMC’s funding could hit the U.S. tech sector like a brick to the face in Home Alone 2.

Jobs and technology are only part of the equation here. The real issue is control over the future of tech innovation. Especially considering that TSMC is a critical supplier for industry leaders like Apple, Nvidia, and AMD. If the U.S. distances itself from TSMC, the tech landscape could shift in ways that benefit China, a country eager to dominate the semiconductor space.

TSMC is up 95% year to date.

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