(Reuters) -Taiwan Semiconductor Manufacturing Company (TSMC) said on Tuesday it has informed the United States of a potential attempt to have it manufacture AI chips for China's Huawei in circumvention of export controls.

The U.S. government restricted the export of high-end AI chips to China two years ago, citing the need to limit the Chinese military's capabilities.

TSMC's U.S.-listed shares were down 1.7% in early trading.

The U.S. Commerce Department was investigating if TSMC had been making chips for China's Huawei, whose access to non-Chinese chips has been curbed by U.S. export controls. TSMC, which counts Apple and Nvidia among its customers, has benefited from a surge in AI development across a spectrum of industries. The Taiwanese contract chip manufacturer, the Commerce Department and Huawei did not immediately respond to Reuters requests for comments.

TSMC had recently informed the U.S. Commerce Department after a customer placed orders for a chip similar to Huawei's Ascend 910B, a processor designed for large language model training, a Financial Times report said earlier in the day.

A crucial element of export controls is a rule prohibiting global chip manufacturers from utilizing US technology or equipment to produce chips intended for Huawei or its products.

(Reporting by Karen Freifeld in New York and Akash Sriram in Bengaluru; Editing by Shinjini Ganguli)