Since its founding more than 30 years ago, Taiwan Semiconductor Manufacturing Co Ltd has grown his business by working for customers such as Apple Inc and Qualcomm Inc. Today, the low-key chipmaker is caught in the middle of Sino-US trade talks and has become an immeasurably valuable asset that both countries are competing for.

The Trump administration opened a new front in the Sino-US conflict on Friday, banning any chipmaker using US equipment from supplying Huawei Technology Co., Ltd. without the permission of the US government. This means that Taiwan Semiconductor Manufacturing Co Ltd and other chipmakers will have to "cut off" Huawei unless exempted by the US Department of Commerce. Taiwan Semiconductor Manufacturing Co Ltd has stopped accepting new orders from Huawei, the Nikkei News reported on Monday.

The move could seriously damage the complex ecosystem that produces technology for consumers and businesses around the world. The attack on Huawei threatens not only its employees and its position as a global leader in smartphone and telecom equipment production, but also hundreds of suppliers.The Chinese government has vowed to protect the leading company, and American companies such as Apple Inc and Boeing Co, which rely on the Chinese market, are facing a crisis.

"China may take retaliatory measures, and investors should be prepared for a possible escalation of trade negotiations," said Sanford C. Bernstein&Co, including Mark Li. Analysts wrote in a research note on Friday.

Huawei's Asian suppliers fell sharply on Monday, with AAC Technologies Holdings Inc., Qiu Ti Technology, Xin Wanda and Lance Technology all down more than 5 per cent. Taiwan Semiconductor Manufacturing Co Ltd, which generates an estimated 14 per cent of revenue from Huawei, fell 2.7 per cent.

The United States blacklisted Huawei last year and American companies are not allowed to supply products to it unless they get a license.The latest move further tightens restrictions to prevent US or foreign chipmakers from working with Huawei and its secret chip design subsidiary Hayes in cutting-edge semiconductors.The Trump administration sees Huawei as a terrible threat to US security, a charge Huawei denies.

"We must change the rules that have been exploited by Huawei and Hayes to prevent US technology from being used to undermine US national security and foreign policy interests," US Commerce Secretary Ross tweeted.

Huawei accuses the United States of ulterior motives.

"the so-called reasons for network security are just excuses," Yu Chengdong, CEO of Huawei's consumer business, posted on Wechat. The key is that Huawei poses a threat to US technological hegemony.

The U.S. decision will hurt not only Huawei and Taiwan Semiconductor Manufacturing Co Ltd, but also Applied Materials Inc, KLA and Lam Research Corp, Morgan Stanley analysts wrote in a research note. Including many American companies. They point out that disruptions to Huawei's production will also hurt US customers from Micron Technology Inc to Qorvo and Texas Instruments Inc. And the report points out that any escalation of trade tensions will have a negative impact on the stock market as a whole.

When it was first founded in 1987, it was hard to imagine that Taiwan Semiconductor Manufacturing Co Ltd would one day be vying for control by world powers. When Zhang Zhongmou, who was born in China and later studied in the United States, founded Taiwan Semiconductor Manufacturing Co Ltd, it was a contract manufacturer that makes semiconductors for customers who do not want to build their own factories.

At that time, the status of contract manufacturers was far inferior to that of producing their own chips. At that time, the dominant chip industry was Intel Corp, AMD and other industry overlords. "A real businessman must have his own fab," said Jerry Sanders, co-founder of AMD.

But things have changed, and for the technology industry as a whole, the contract manufacturing industry has now become more strategic. From Apple Inc and Huawei to Qualcomm Inc and Nvidia Corp. These customers find that they can innovate faster if they focus on chip design, and then they can get a contract factory like Taiwan Semiconductor Manufacturing Co Ltd to help them produce. Creators of emerging technologies such as artificial intelligence and the Internet of things also rely on foundry factories to open up new markets.

Today, many of the chips used in mobile phones, self-driving cars, artificial intelligence and other key technologies are made by contract manufacturers. By investing heavily in more advanced fabs, Taiwan Semiconductor Manufacturing Co Ltd has become a global leader in contract manufacturing, with capital expenditure of about $16 billion this year.

Taiwan Semiconductor Manufacturing Co Ltd now has a 5nm manufacturing process, about twice the width of human DNA molecules, while Semiconductor Manufacturing International Corporation, a top contract manufacturer in mainland China, still has a 14nm manufacturing process. This makes Taiwan Semiconductor Manufacturing Co Ltd's chip more powerful and more energy-efficient.

If Taiwan Semiconductor Manufacturing Co Ltd "cut off", Huawei and Hayes will not have any good choice. One possibility is to buy off-the-shelf chips from MediaTek and Samsung, an option mentioned by Xu Zhijun, Huawei's rotating chairman, at the end of March. But under new restrictions from the U.S. Department of Commerce, this road may no longer work.

Semiconductor Manufacturing International Corporation has been trying to climb the technology ladder and is looking at a secondary listing that could raise more than $3 billion.

But it is a long-term effort during which Huawei's products could be affected and risk falling behind competitors such as Apple Inc or XIAOMI.

It is becoming increasingly difficult for Taiwan Semiconductor Manufacturing Co Ltd to remain neutral in increasingly strained Sino-US relations. The company touts itself as a "contract manufacturer for everyone" and strives to be Switzerland in the technology industry.It supplies to Chinese customers such as Huawei and the US military, while relying on US semiconductor manufacturing equipment makers such as Applied Materials Inc and Lam Research.

Last week, Taiwan Semiconductor Manufacturing Co Ltd moved closer to the United States and announced that he would build a $12 billion chip plant in Arizona. The US Department of Defense has expressed concern that overseas fabs are vulnerable to cyber attacks, arguing that domestic production can ensure a more reliable supply of chips.

The proposal appears to have been carefully considered to address US security concerns without doing too much harm to profits or political balance.

However, it is not clear whether the plan will give Taiwan Semiconductor Manufacturing Co Ltd some preferential treatment in supplying goods to Huawei.

Taiwan Semiconductor Manufacturing Co Ltd will not get permission because of its plan to build a 5-nanometer fab in the United States. It doesn't count at all, "Keith Krach, the US under Secretary of State for economic growth, energy and the environment, told reporters on a conference call. "We do not guarantee this, and this is not expected to happen. "

At the same time, China seems ready to retaliate against new restrictions on Huawei. China stands ready to take counter-measures, including imposing restrictions on Apple Inc, suspending the purchase of Boeing Co aircraft and adding US companies to the "list of unreliable entities," the Global Times reported on Friday.

The list will cover "foreign entities that have caused material or potential damage to Chinese companies and industries," the report said.