Megha Shrivastava
The recent salvo of export control measures against China’s semiconductor industry came not from the United States, but Taiwan. On June 14, Taiwan’s Ministry of Economic Affairs added a total of 601 entities to its trade blacklist – including China’s Huawei and Semiconductor Manufacturing International Corporation (SMIC), alongside organizations like al-Qaida and the Taliban. This move will require Taiwanese companies to obtain government licenses in order to ship to SMIC or Huawei. Though the International Trade Administration of Taiwan highlights larger national security considerations, the move signifies Taiwan’s rising position in the global chip supply chain.
Taiwan’s strategic value in the global semiconductor supply chain derives from its near-monopoly over cutting-edge chip manufacturing. For decades, its predominant position in the global chip value chain, especially through TSMC, has left both the United States and China economically and technologically dependent on Taiwan, arguably preventing cross-strait tensions from escalating to a forceful military occupation by China. The blacklisting of Huawei and SMIC signifies a conscious shift in Taiwan’s role from a neutral supplier in the tech ecosystem to an assertive actor holding a crucial position in the global supply chain.
In addition to that, there are two reasons why Taiwan’s move to restrict exports to SMIC and Huawei remains significant. First, this policy is unfolding at a time when the current U.S. policies appear to be more inward-looking, and Washington’s attention to tightening export controls remains low. Second, China’s two chip giants, Huawei and SMIC – specializing in the design and foundry sectors, respectively – are making coordinated strides at bypassing the controls and achieving breakthroughs in independent innovation.
Chinese companies’ breakthroughs – indicating rising indigenous chip development capabilities – often highlight their ability to bypass U.S. sanctions. TSMC’s business with Chinese companies, despite U.S. sanctions, was seen as a major loophole; TSMC chips are reportedly found in Huawei products. Taiwan’s blacklisting of exports to these Chinese firms now tightens the grip of U.S. policies, plugging a key gap in the export control regime that had previously allowed Chinese firms to access critical components via indirect routes.
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