Not just a blacklist! Taiwan plans to ban the sale of AI chips to China entirely, potentially impacting supply chains like TSMC?

Bloomberg reports that Taiwan plans to ban the sale of AI chips to China entirely and will criminalize smuggling. The Ministry of Economic Affairs confirms it is negotiating with the U.S., but has not yet announced measures. Industry insiders analyze that this move could impact TSMC’s approximately 79 billion yuan in revenue from China and its contract manufacturing chain.

Bloomberg reported yesterday that the Taiwanese government is considering implementing stricter export controls on AI chips shipped to China. In response, the Ministry of Economic Affairs stated that Taiwan and the U.S. are continuing discussions on issues such as high-end chip regulation.

Because Taiwan holds a pivotal position in the tech supply chain, industry experts analyze that if these potential new strict regulations are enacted, they are expected to directly affect TSMC and other leading manufacturers’ subsequent shipments and global supply chain arrangements.

Bloomberg: Taiwan Plans to Expand AI Chip Ban on China Restrictions

Bloomberg states that the Taiwanese government is officially considering significantly tightening export controls on AI chips to China, planning to expand the sales restrictions from previously targeting specific blacklisted companies like Huawei and SMIC to all Chinese customers, as part of Taiwan-U.S. trade negotiations.

The report notes that currently, Taiwanese law does not criminalize unauthorized exports of AI chips to China. While authorities warn potential sellers that they may violate U.S. regulations, in domestic courts, they can only prosecute suspected smuggling under other existing local laws (such as document forgery), which results in higher prosecution thresholds and limited scope of investigation.

If new regulations are implemented, Taiwan will be able to criminalize smuggling AI chips into China for the first time.

The Ministry of Economic Affairs confirms negotiations with the U.S., but has not yet disclosed measures

In response to Bloomberg’s report, the Ministry of Economic Affairs quickly responded last night, stating that it will continue to strengthen Taiwan’s management mechanisms for strategic high-tech goods to align with international export control trends and safeguard national security.

The Ministry emphasized that in recent years, the U.S. has continuously strengthened export controls on advanced chips based on regulations such as the Export Administration Regulations (EAR). The U.S. is an important trading partner for Taiwan, and Taiwan is maintaining communication with the U.S. through existing channels regarding issues like illegal transshipment of high-tech goods. Currently, Taiwan and the U.S. are continuing discussions on high-end chip regulation.

Last year, Taiwan already blacklisted Huawei and SMIC, but if a new comprehensive restriction measure is introduced, it could trigger a chain reaction. Chinese Foreign Ministry spokesperson previously criticized such actions as damaging Taiwan’s interests.

In April this year, Taiwanese courts sentenced a Tokyo Power Semiconductor engineer to 10 years in prison for stealing TSMC’s confidential data, demonstrating the authorities’ focus on preventing technology leaks.

• Related report: TSMC 2nm leak case continues! Prosecutors indict Tokyo Power Semiconductor, seek a fine of NT$120 million

Industry analysis: Potential impact on TSMC and server contract manufacturing chain

If Taiwan enacts a new round of measures, industry insiders expect it will directly affect TSMC’s subsequent shipments and impact the server contract manufacturing chain.

According to the Economic Daily, industry experts analyze that although TSMC has already ceased shipments to blacklisted Chinese companies under previous regulations, but based on TSMC’s Q1 2026 quarterly report, if divided by customer headquarters location, the Chinese market still accounts for about 7% of revenue.

With TSMC’s consolidated revenue of approximately NT$1.13 trillion in Q1, the related revenue from customers headquartered in China still amounts to about NT$79 billion. A full ban could introduce uncertainty to this portion of revenue.

Image source: Flickr, Li Jilin Photography Taiwan’s government is considering stricter export controls on AI chips shipped to China, industry analysis suggests it could impact TSMC and the server contract chain

Beyond wafer fabrication, downstream server assembly industries will also face challenges.

Tech media Tom’s Hardware analyzed that Taiwan manufactures the vast majority of AI servers globally, with Foxconn holding about 40% market share, and the rest divided among Quanta, Wistron, Wiwynn, and Inventec. These Taiwanese companies are responsible for integrating Nvidia or AMD accelerators into rack-level systems, which are then shipped to data centers worldwide.

Although TSMC has been prohibited from manufacturing advanced chips for Chinese customers, this does not prevent servers containing advanced chips from being transshipped to China downstream.

Will Taiwan follow U.S. standards for regulation?

If Taiwan adopts U.S. standards, it is expected to use Total Processing Power (TPP) as the dividing line.

Currently, the U.S. sets the threshold at 20k 1,000 TPP and 6,500 GB of DRAM bandwidth per second. Products below this standard, such as Nvidia’s H200 or AMD’s MI325X, can apply for Chinese permits on a case-by-case basis starting January 2026. Chips exceeding this threshold are strictly prohibited.

Therefore, if Taiwan legislates to explicitly define similar performance thresholds, it will directly target hardware assembled in Taiwan, blocking its legal entry into the Chinese market. This would change the previous situation where prosecutors could only pursue cases after violations through other illegal activities, making enforcement more straightforward.

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