Taiwan is moving to expand controls on exports of advanced semiconductors to mainland China. The plan would broaden existing rules, which focus on semiconductor manufacturing equipment, to include advanced chips and key materials and parts, and would impose tough penalties for circumvention via third countries. The move is seen as an effort to close loopholes in current rules after authorities uncovered a recent case of servers equipped with high-performance artificial intelligence (AI) semiconductors being rerouted to China.
According to the Central News Agency (CNA) and Economic Daily News on the 2nd, the Legislative Yuan’s Economics Committee will hold a public hearing this afternoon on a Trade Act amendment to tighten export controls to China on certain semiconductors and related equipment. The amendment, introduced by lawmakers from the ruling Democratic Progressive Party, would codify restrictions on semiconductor exports to mainland China and strengthen criminal penalties for violations.
The amendment would prohibit the export to mainland China, without government approval, of certain integrated circuits as well as key materials, parts, and manufacturing equipment needed for semiconductor wafer production. The same rules would apply when products are ultimately supplied to China by being shipped or resold through a third country. Violations could bring up to 10 years in prison and a fine of up to 10 million Taiwan dollars (about 400 million won), and assets gained from related crimes could be confiscated.
The bill was prompted by a case of high-performance AI Semiconductor chips being rerouted to China. According to CNA, in August eight people connected to corporations including Supermicro were indicted for allegedly exporting 74 servers equipped with Nvidia’s advanced artificial intelligence (AI) semiconductors to China. In Taiwan’s political circles, critics said existing rules focused on semiconductor manufacturing equipment were not sufficient to block the flow of advanced chips and related parts into China.
In practice, Taiwan’s current export controls on China are weighted toward semiconductor manufacturing equipment. In July, lawmaker Chung Chia-pin of the Democratic Progressive Party noted that the export rules applied to mainland China are limited to 12 categories of semiconductor wafer manufacturing equipment, and said the scope is narrow compared with the broad list of strategic advanced-technology items applied to other controlled destinations.
Taiwan’s legislature is also focused on the possibility that China could repurpose advanced semiconductors for military use. The lawmakers who introduced the bill said, “Semiconductor chips are used not only in general civilian information and communications products, but can also be used for military purposes such as precision-guided weapons and supercomputer computing,” adding, “If Taiwan’s advanced semiconductors are illegally smuggled to mainland China, they could be used for weapons manufacturing and proliferation, heightening cross-strait tensions and military threats.”
Taiwan has been controlling exports of strategic advanced-technology items, such as semiconductor manufacturing equipment, in line with the United States’ tightened restrictions on semiconductor exports to China. More recently, it has also been pursuing ways to expand the scope to include advanced AI Semiconductor chips and servers. Minister Kung Ming-hsin of Taiwan’s Ministry of Economic Affairs said in September that related plans had been drawn up and were being discussed with relevant agencies, and in October said some export-control measures would be aligned with those of the United States.
If Taiwan, following the United States, also broadens the scope of export controls on semiconductors to China, corporations in China could face additional constraints in procuring advanced semiconductors and related equipment. Liu Meng-jun, director of the First Research Division at the Chung-Hua Institution for Economic Research, told Economic Daily News, “This legal amendment appears to be a broad strategic framework for cooperating with allied countries,” analyzing that “it reflects a declarative policy in response to U.S. concerns, hoping all partner countries will take steps to blockade mainland China.”
However, Liu noted, “Because industrial supply chains are globally built, export-control measures on semiconductors to mainland China can only remain at a ‘best-efforts level,’ and there will be limits in actual enforcement.”