The world’s biggest chip maker, Taiwan Semiconductor Manufacturing Company (TSMC), has said it is concerned by a recent US government request to disclose critical supply chain information. The request comes from the US Commerce Department, which intends to use the information to tackle the global chip shortage. Industry watchers in China have raised red flags, arguing that the request would disadvantage Chinese firms.

Last month, the US Commerce Department asked various international semiconductor suppliers and users to submit details about their supply chains, including inventory data, by November 8. The chosen companies include semiconductor suppliers Samsung Electronics, Intel and TSMC, carmakers Daimler and BMW, and consumer hardware and software firms such as Apple and Microsoft.

“While the Department invites input from all interested parties, it is particularly interested in obtaining information from foreign and domestic entities that actively participate in the semiconductor product supply chain at any level,” the Commerce Department wrote in its request.

Although compliance with the request is voluntary, Commerce Secretary Gina Raimondo has warned industry representatives that the Commerce Department may decide to invoke the Defense Production Act or other tools to force their hands if necessary.

On Wednesday chip giant TSMC made a statement expressing concerns about the US’ request:

“We will definitely not leak our company’s sensitive information, especially that related to our customers,” stated Sylvia Fang, TSMC’s general counsel, according to Nikkei Asia. “We are still at the stage of doing some preliminary research and evaluating the contents of the questionnaire [sent by the US government],” Fang added.

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The questionnaire was posted on the US Federal Register and includes questions for chip manufacturers, developers, packaging and testing service providers. Questions include a request to list “each product’s top three current customers and the estimated percentage of that product’s sales accounted for by each customer.”

Another point asks respondents to list products “with the largest order backlog” and the number of sales for such products.

Earlier this week, TSMC’s chairman, Mark Liu, told TIME that he suspected dealers were stockpiling chips, exacerbating the global shortage. “There are people definitely accumulating chips who-knows-where in the supply chain,” he said.

In a meeting between Raimondo and US President Joe Biden last month, the White House indicated that it would consider using a Cold War-era national security law to force companies in the semiconductor supply chain to give up key information if they don’t respond to the request within 45 days.

The request has raised alarm bells in the chip industry over the potential leakage of trade secrets and customer data. TSMC’s local investors have also filed for a provisional injunction to Taiwan Hsinchu District Court, asking that the foundry should have the right to reject the US’ request to disclose critical trade secrets.

Meanwhile, Washington’s move also rattled mainland China. Although no Chinese firms were directly mentioned, commentators have pointed out that it could put the domestic semiconductor market at a disadvantage leading to more targeted sanctions.

Amid the ongoing trade war between the two nations, the US has implemented sanctions that banned TSMC from supplying chips to certain Chinese firms, Huawei being a textbook example. The move has severely impacted the Shenzhen-based company’s smartphone business.

The Chinese government has not directly commented on the US Commerce Department’s request. However, China-based analysts have pointed out that more detailed insight into these companies’ supply chains could lead to more precisely targeted sanctions on Chinese firms.

“This move by the US will help it create domestic jobs, accurately acquire international companies with potential, and place sanctions on key Chinese companies,” said Xi Chen, an academic committee member at Peking University’s Institute for Global Cooperation and Understanding.

“The only way to achieve these things is through identifying key costs,” he added, as reported by the South China Morning Post.

Chen, who also advises for a think tank affiliated with China’s Ministry of Industry and Information Technology, also asserted that the real impact on the global chip supply chain would be limited.

The unholy triangle

TSMC is the world’s largest and most valuable semiconductor maker. It represents an essential part of Taiwan’s economy. It is also a key piece of Taiwan’s foreign relations puzzle.

Kung Ming-hsin, the Minister of Taiwan’s National Development Council who oversees the National Development Fund, TSMC’s largest shareholder, also commented on the latest development. He said Washington’s request is aimed not only at TSMC, or even just Taiwanese suppliers, but at all companies involved in the semiconductor supply chain, per Nikkei Asia report.

Despite its concerns regarding the Commerce Department’s request, it is unlikely that TSMC will outright reject cooperation with the US.

Kung, who also serves on the board of directors of TSMC, added that based on a preliminary assessment of the questionnaire, there should be room for answering the questions without compromising the confidential information of TSMC’s clients.

Given the precarious nature of China-Taiwan relations lately, TSMC’s options may be limited.

Since last Friday – not coincidentally also China’s national day – the People’s Republic has launched the largest ever incursion over Taiwan, with a total of 155 warplanes. It blamed the US for the increased tensions.

In response, the US Department of Defense said on Monday that China’s increasing military activities near Taiwan were “destabilising and increase the risk of miscalculation.

“Our commitment to Taiwan is rock-solid and contributes to the maintenance of peace and stability across the Taiwan Strait and within the region,” the DoD added.

The current consensus in Washington is to fight China should it attempt to conquer Taiwan by force. At a speech at the Center of Strategic Studies last Friday, deputy secretary of defense Kathleen Hicks said that if Beijing were to invade Taiwan, “we have a significant amount of capability forward in the region to tamp down any such potential.”

Nevertheless, US officials are also aware that an outright war with China would be a lose-lose situation. The White House is therefore adamant about “maintaining open lines of communication”.

Joe Biden said on Wednesday that he had spoken to the Chinese president, Xi Jinping, about Taiwan and both premiers will abide by “the Taiwan agreement”.

It is not clear what agreement Biden was referring to, as the US has long abided by the “one-China policy” – an understanding that recognises the People’s Republic of China as the US’s sole diplomatic partner, thus de-recognising the Republic of China (Taiwan). However the US State Department adds:

The 1979 US Taiwan Relations Act provides the legal basis for the unofficial relationship between the United States and Taiwan, and enshrines the US commitment to assist Taiwan in maintaining its defensive capability. The United States insists on the peaceful resolution of cross-Strait differences, opposes unilateral changes to the status quo by either side, and encourages both sides to continue their constructive dialogue on the basis of dignity and respect.