On June 10, 2026, reports surfaced that Taiwan's Ministry of Economic Affairs (MOEA) and its International Trade Administration are weighing the most far-reaching AI-chip export controls the island has ever contemplated: rules that would, for the first time, cover all customers in China rather than only blacklisted firms such as Huawei and SMIC. According to the Taipei Times, Taipei would align with the US Total Processing Performance (TPP) framework — restricting chips above 21,000 TPP and 6,500 GB/s of memory bandwidth — and give regulators authority to treat the diversion of advanced AI servers to China as a domestic offence.
The MOEA confirmed on June 9 only that it will "continue to strengthen oversight of strategic high-tech goods" and that "Taiwan and the US are continuing consultations." Foreign Minister Lin Chia-lung framed the calculus carefully: Taiwan "doesn't want to weaponize semiconductors," but "if our counterparts harm our interests, we will need to respond." Nothing is finalised, and no Taiwanese company has been accused of wrongdoing.
The strongest case for acting
Start with what the regulators get right. Taiwan assembles the overwhelming majority of the world's AI servers — Foxconn alone now holds north of 40% of the global market, with Quanta, Wistron, Wiwynn and Inventec taking much of the rest. That concentration makes the island the single most important physical chokepoint for advanced compute reaching Chinese data centres. If servers packed with restricted Nvidia and AMD accelerators are being re-routed through third countries into China, no amount of US licensing discipline at the chip level fully plugs the leak, because the systems are built in Taiwan.
The enforcement gap is genuine and, frankly, embarrassing. Today Taiwanese authorities can warn an exporter that a shipment may breach US rules — but unauthorised AI-chip exports to China are not themselves a crime under Taiwanese law. Prosecutors must reach for unrelated statutes (fraud, smuggling of ordinary goods) to punish suspected diversion. A targeted criminal provision tied to the existing Regulations Governing the Export and Import of Strategic High-tech Commodities would let Taipei police its own supply chain on its own authority, rather than as a junior partner enforcing another country's export-control list.
What would actually change
Taiwan is not starting from zero. On June 16, 2025, the MOEA's International Trade Administration added Huawei and SMIC to its Strategic High-tech Commodities (SHTC) entity list, requiring local firms to obtain a permit before shipping to those named entities. The June 2026 proposal is a categorical leap: instead of an entity list keyed to specific bad actors, the new rule would impose a performance threshold on the entire China market.
That mirrors Washington's January 15, 2026 Bureau of Industry and Security rule, which moved chips below the 21,000-TPP / 6,500-GB/s line — roughly Nvidia's H200 and AMD's MI325X — from presumptive denial to case-by-case licensing for China and Macau, while keeping the most capable accelerators restricted. Aligning thresholds has real value: it removes the arbitrage in which a chip blocked from US shores walks out of a Taiwanese assembly line instead.
Where proportionality has to bite
Here is the pro-innovation worry. The US case-by-case regime is not a clean line; it is a thicket. To win a licence, exporters must certify domestic-supply adequacy, prove foundry capacity is not diverted from US production, cap China shipments at a share of domestic sales, and submit to third-party lab testing before each shipment. If Taiwan bolts a criminal penalty onto an equally baroque licensing process, it risks importing the compliance cost without the administrative capacity to run it — and the people who absorb that cost first are not Beijing's smugglers but Taipei's own world-leading assemblers.
A threshold that sweeps in every Chinese customer also catches legitimate commercial buyers: Chinese cloud firms, universities and enterprises that have every right to purchase sub-threshold hardware that even US rules now permit under licence. A blunt all-of-China ban that is stricter than the American framework it claims to mirror would hand TSMC's and Foxconn's competitors in South Korea and elsewhere a marketing gift, while doing little to stop a determined diverter who simply shifts assembly offshore.
The right target is the diverter, not the customer. Criminalise knowing diversion; license — don't prohibit — the lawful sub-threshold trade.
A calibrated path
Taiwan can have both security and proportionality if it resists the maximalist instinct. Three design choices matter. First, scope the criminal liability narrowly to knowing diversion and false end-user declarations — the conduct that actually defeats the controls — rather than strict-liability exposure for any paperwork slip. Second, keep the licence floor at the US threshold, not below it; aligning with Washington is defensible, out-bidding it is self-harm. Third, invest in the unglamorous machinery — know-your-customer tooling, fast licence adjudication, and a published guidance regime — so that compliance is a predictable cost of doing business, not a lottery that pushes assembly out of Taiwan entirely.
Taiwan's leverage over advanced compute is its silicon shield; used with precision it deters diversion and reassures allies. Used as a blunt instrument, it erodes the very commercial dominance that makes the shield worth defending. Closing the criminal-liability gap is overdue. Out-regulating the United States is not.