Taiwan is investigating whether four of its firms broke US sanctions or its own investment rules when they provided services to Chinese companies that are reportedly helping Huawei build chip factories.
Emile Chang, a Ministry of Economic Affairs official in charge of reviewing investments, told CNN Friday that an "administrative probe" had been initiated this week into four Taiwanese companies named in a media report.
The investigation will focus on whether their business activities in China were consistent with approvals they had been granted by the ministry, he said.
If any of them are found to have violated the rules, each company is subject to a maximum fine of 25 million New Taiwan dollars ($777,000).
The ministry will also look into whether the companies — Topco Scientific, United Integrated Services, L&K Engineering Co and Cica-Huntek Chemical Technology — violated any US sanctions, Chang added.
All four companies deny any wrongdoing. In separate statements, they said they were involved only in wastewater management, interior decoration or construction work approved by Taiwan, and did not provide semiconductor materials or equipment.
In recent years, Huawei has become a symbol of the tech rivalry between the United States and China. Washington and its allies in Europe and Asia have sought to curb its access to advanced chips and chipmaking technology due to fears that the telecoms company spies for the Chinese government.
Huawei has always denied the allegations. It has not responded to a CNN request for comment.
Formerly the world's second largest maker of smartphones, the company has been attempting a comeback after being hit by US export restrictions, which were first imposed in 2019.
Many Taiwanese companies, including chip giant TSMC and Apple supplier Foxconn, operate in China and are closely integrated into its supply chains. However, the island's government keeps a close eye on what its companies are doing and does not allow its most advanced technology to be produced there.
On Wednesday, Taiwan's Minister of Economic Affairs Wang Mei-hua was asked by a lawmaker about a Bloomberg report that the four companies had allegedly supplied services to help Huawei build infrastructure for a network of chip making plants in China.
Wang responded by saying the four companies had apparently provided Huawei with "wastewater and environmental protection equipment" for its factories, which she said was ostensibly different from the critical technologies the Taiwan government designated that could potentially impact national security.
For years, Taiwan's companies have been treading a fine line between engaging China's commercial opportunities and avoiding potential violations of export controls, particularly as Beijing has ramped up military pressure on the island.
Cross-strait relations are a key issue in Taiwan's presidential election, which is due in January.
China remains Taiwan's largest trading partner. But China's ruling Communist Party claims Taiwan, home to 24 million residents, as its territory — despite never having controlled it. It has long vowed to "reunify" Taiwan with the Chinese mainland, by force if necessary.