Taiwan puts companies behind China’s AI ambitions on export control list

In a significant move to align with the United States, Taiwan has officially designated China's leading technology firms, Huawei and Semiconductor Manufacturing International Corporation (SMIC), on its export control list. This action underscores Taiwan's commitment to address concerns regarding national security and the proliferation of advanced weaponry. The International Trade Administration of Taiwan updated its strategic high-tech commodities list, which now includes hundreds of entities from China, Myanmar, Russia, Iran, and Pakistan. Under these new regulations, Taiwanese companies will need to secure permits before they can export to the companies listed, including Huawei and SMIC. This decision comes at a time of heightened tensions between the US and China, particularly surrounding cutting-edge technologies like semiconductors and artificial intelligence. The backdrop of this decision involves the US's escalating worries about its technology potentially being repurposed for military applications by China. Last month, the Trump administration imposed restrictions on the sale of chip design software to China, further intensifying the ongoing trade conflict between the two nations. Taiwan’s latest restrictions reflect its proactive stance in collaborating with the US, which is its largest unofficial ally, to enforce tech restrictions against Beijing more effectively. Despite China's claims over Taiwan as part of its territory, Taiwan Semiconductor Manufacturing Company (TSMC) had been a supplier for Huawei until 2020, when the Trump administration effectively barred such trade. Since then, Huawei has turned to SMIC for chip production, which has also come under US scrutiny. Experts suggest that the recent tightening of regulations by Taiwan may be more symbolic than impactful, given the existing US restrictions on these companies. Min-yen Chiang, a nonresident fellow at a Taipei think tank, noted that Taiwan is now the second country, after the US, to place SMIC and Huawei on its export control list. This move indicates a clearer intention from Taiwan to align its export regulations closely with those of the United States. The Taiwanese government recognizes the necessity of actively cooperating with the US to mitigate security risks. Last year, TSMC chips were reportedly found in a Huawei AI processor, raising alarms in Washington about potential breaches of the export ban. Although TSMC clarified it had not supplied Huawei since 2020, concerns grew that chips meant for other Chinese firms might have been redirected to Huawei. The US Department of Commerce has been investigating this incident, and TSMC could face significant penalties, possibly exceeding $1 billion. The new export controls, while not a direct response to the TSMC incident, signal Taiwan's commitment to strengthening its oversight mechanisms. Brady Wang, an associate director at a market analysis firm, emphasized that the discovery prompted both TSMC and the Taiwanese government to reassess their existing controls to prevent potential supply chain loopholes. Historically, US administrations have targeted companies like Huawei, implementing restrictions to curb their access to American technology. These efforts intensified under President Biden, who imposed additional limitations on the sale of advanced semiconductors and related equipment to China, as part of a broader strategy to protect US technological superiority. While these restrictions have initially hampered Chinese companies, both Huawei and SMIC have made progress in chip production. Huawei's recent launch of the Mate 60 smartphone, powered by SMIC-made chips, has raised eyebrows and triggered further investigations by US authorities. Analysts suggest that Taiwan's recent export controls are influenced by multiple strategic factors, including concerns about the advanced chips used in Huawei's devices. Galen Zeng from IDC noted that these developments are likely to enhance supply chain transparency and may ultimately benefit Chinese suppliers as they seek domestic alternatives in light of the new restrictions. In the long run, this could accelerate China's efforts toward semiconductor self-sufficiency, benefiting local suppliers and manufacturers. In a recent interview, Huawei's founder, Ren Zhenfei, downplayed the effects of US technology restrictions, claiming that the company's chip technology remains competitive despite being a generation behind. He emphasized the importance of innovative methods like stacking chips to maintain performance levels comparable to the most advanced technology available.