Taiwan eyes curbs on AI chip sales to China to align with U.S.

Taipei is poised to escalate its role in the US-China tech war, moving to criminalize the unauthorized sale and diversion of advanced AI chips to mainland China, a significant policy shift aimed at bolstering alignment with Washington's stringent export controls. The proposed measures, currently under deliberation, would grant Taiwanese authorities unprecedented legal tools to prosecute illicit shipments of sophisticated hardware, including Nvidia-powered AI servers, an activity previously not considered a criminal offense under local law. This aggressive posture from President William Lai administration comes amidst rising concerns over semiconductor smuggling and increasing pressure from American officials to close existing loopholes, marking a pivotal moment in the global struggle for technological supremacy. The stakes are acutely high as Taiwan, home to TSMC and the heart of advanced chip manufacturing, navigates the escalating US-China rivalry. The proposed curbs follow the US Commerce Department's recent May 31, 2026, guidance to prevent Chinese-headquartered firms from acquiring advanced AI chips via overseas subsidiaries, closing a loophole that critics argued allowed substantial volumes to reach Chinese entities since May 2025. Taiwan's existing controls have primarily targeted blacklisted entities like Huawei and SMIC, but the new framework would restrict sales to all customers in China above a certain processing power threshold, mirroring Washington's approach. This move also responds to revelations of suspected semiconductor smuggling operations, with Taiwan making its first known detentions last month for alleged falsification of documents in schemes reportedly routing chips through Japan to Hong Kong. The immediate ripple effects will be keenly felt across the global semiconductor ecosystem and are almost certain to draw a fierce rebuke from Beijing, which views Taiwan as an integral part of its territory and has historically condemned any actions it perceives as undermining its sovereignty or aligning with US interests. While the specifics are still being ironed out through ongoing trade talks with the US, Taiwan's commitment to strengthening enforcement signals a hardened stance under President Lai's leadership, further solidifying the island's 'Silicon Shield' strategy. Companies like Nvidia, whose advanced chips are at the core of this geopolitical contest, and AI server assemblers such as Gigabyte Technology and Asustek Computer, face intensified scrutiny and compliance challenges, prompting a reevaluation of supply chains and market access in an increasingly bifurcated tech landscape.