TAIPEI, Oct 23 (Reuters) - Taiwan Semiconductor

Manufacturing Co ( TSM ) has suspended shipments to a customer

after it discovered that one of its chips supplied to the client

ended up in a Huawei product, according to a Taiwan official

familiar with the situation.

About two weeks ago, TSMC suspended shipments to the client

and began a detailed investigation, the trade and economic

official said, speaking on condition of anonymity given the

sensitivity of the situation.

The company has notified the U.S. and Taiwanese governments,

the official said as it was an "important warning event" within

TSMC, and can, at its earliest, be traced back to Oct. 11.

The official did not identify the client TSMC had cut off.

TSMC declined comment.

TSMC had alerted U.S. officials after tech research firm

TechInsights took apart a Huawei product and found one of TSMC's

chips, Reuters reported on Tuesday, in a possible violation of

U.S. export restrictions.

The U.S. curbed the export of advanced artificial

intelligence chips to China two years ago, citing the need to

limit the Chinese military's capabilities.

Huawei has been a primary target of the U.S. government's

efforts to escalate the use of export controls to keep Chinese

companies from obtaining, designing or manufacturing advanced

semiconductors.

Still, Chinese entities have been trying to circumvent the

restrictions and have used cloud services provided by companies

like Amazon ( AMZN ) to access advanced U.S. chips and AI

capabilities, Reuters reported earlier this year.

Taiwan's government, wary of its giant neighbour given

repeated military and other threats, has its own export control

to prevent advanced chips from being made in China, and Taiwan

officials say they take compliance with U.S. rules seriously.

(Reporting by Yimou Lee and Ben Blanchard in Taipei, Deborah

Sophia in Bengaluru; Editing by Arun Koyyur)