Taiwan Moves to Make Smuggling AI Chips to China a Crime, Paying Off a Promise It Made to Washington

The island that makes the world's most advanced chips is getting ready to make smuggling them to China a crime. Taiwan plans to add AI servers and cutting-edge semiconductors to its list of controlled exports, and once the rules take effect, shipping restricted AI hardware to China will be a criminal offense under the Foreign Trade Act, Minister of Economic Affairs Kung Ming-hsin told Bloomberg News.

Taipei is doing this with Washington in mind, and the minister said so plainly.

A promise in the trade deal

"Going forward, some of our measures on controlled items will correspond to American ones because we have made quite some commitments in the Agreement on Reciprocal Trade," Kung said in the October 12 interview. That agreement is the trade deal the US and Taiwan signed this year.

He declined to say when the government will put the measures in place. So for now this is a plan with no start date, not a law.

Once in force, the controls would be among the strictest steps President Lai Ching-te's administration has taken to protect Taiwan's technology and national security interests. They also show Taipei testing how assertive it is willing to be while it manages pressure from American officials on several fronts. Lai has said before that Taiwan would address unspecified US concerns about export controls, without giving details. Kung also described plans to raise billions of dollars for industrial parks in the US, meant to anchor an in-country supply chain for Nvidia and other AI hardware makers.

Why the law matters

Today, Taiwan does not treat unauthorized AI chip exports to China as a crime. Officials warn would-be sellers that they may be breaking US rules, but in Taiwan's own courts the only option is to charge suspected smugglers under other local laws.

The island already requires permits to export sensitive technology with possible military uses, yet advanced AI chips and servers are not specifically covered, Taiwan News reported. That gap showed in August, when prosecutors indicted nine people over an alleged scheme involving 130 AI servers, 74 of which were allegedly shipped to China through other countries using false documents. The charges were breach of trust and document forgery, not anything specific to AI hardware.

The US has been tightening controls on advanced chip exports since 2022 over concerns that the technology could strengthen China's military. It has long restricted Chinese purchases of Nvidia and AMD accelerators, but companies in China have kept getting them through a sophisticated black market. US officials allege that billions of dollars' worth of Nvidia hardware has reached China over the past few years.

The cases keep piling up. A contractor linked to Super Micro Computer pleaded guilty in a US case over the diversion of Nvidia-powered servers to China, and a Southern California executive was arrested on charges of funneling about $300 million in Nvidia AI servers to China through Malaysia and Singapore.

Containment that may already be slipping

Semafor called the move a way for Taipei to win favor with the US and a significant step against black market sales to Chinese buyers. It also pointed out the irony. US companies still lead on chip design, but Chinese firms are increasingly taking domestic AI chip market share from Nvidia, with Huawei passing key milestones in recent days.

Beijing is building its own walls too. The same week, it proposed export controls on its top AI models and advanced chip designs.

What Taiwan has not said is when its rules will start or how far they will reach. Until Kung's ministry puts a date on it, smugglers working through the island can still only be charged under laws like forgery, not with a chip crime.

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