On 6 October 2026, Focus Taiwan reported that the New Taipei District Prosecutors Office had indicted 10 people, including Chen Chien-hsiung, who runs several Taiwanese tech companies. The charges are fraud, forgery and money laundering. They are not export-control violations. That choice of charges is the most telling detail in the case.
What prosecutors allege
According to Focus Taiwan, Chen, a former chip-distributor salesperson, learned that the state-backed National Chung-Shan Institute of Science and Technology (NCSIST) was an authorized end user of Analog Devices and Texas Instruments products. From 2017, the defendants allegedly listed NCSIST as the end user and forged an NCSIST department stamp to pass verification. They then bought restricted high-speed chips. After import, they allegedly relabeled products originally made in the Philippines, South Korea and Singapore as "Made in Taiwan" to avoid customs and Ministry of Economic Affairs scrutiny.
Prosecutors say the chips went to Hong Kong buyers, including China-controlled companies, and that the defendants knew the US Department of Commerce barred such sales to China, Hong Kong and Macau. They put profits at more than NT$300 million (about US$9.4 million). Prosecutors seek 10 years for Chen and 1 to 8 years for the others.
The Taipei Times adds that the chips included more than 10 controlled types, that one group sold chips certified to US military specifications, and that prosecutors say the chips could be used in radar, antenna arrays and uncrewed military aircraft. It puts total profits across the groups at about NT$360 million. These allegations are untested; the defendants are entitled to a trial.
The gap the charges reveal
The fraud theory works because the defendants allegedly lied to Taiwanese and foreign counterparties about who the end user was. The harm prosecutors can prove is deception. The resale to China is the aggravating context, not the offense itself.
The June 2026 reporting makes the gap explicit. AFP, via Asharq Al-Awsat, reported that exporting AI chips to China is not a criminal offence in Taiwan, though it is under US law, and that prosecutors rely on other laws instead. DPP legislator Chung Chia-pin proposed a Foreign Trade Act amendment adding a "mainland China semiconductor chip clause." The same report described raids on 12 sites tied to a separate AI-server probe involving Super Micro Computer, Albatron Technology and Chief Telecom.
On 17 June, according to Taiwan News, Economics Minister Kung Min-hsin told a legislative committee that his ministry had begun revising the rules. He said it must coordinate with national security bodies, the National Science and Technology Council and the Ministry of Finance. Chung also asked why only 12 categories of strategic high-tech goods are restricted from export to China.
The strongest case for tougher criminal penalties
The argument for acting fast is strong. Taiwan sits at the center of the global chip supply chain, and its credibility with Washington depends on not being a transshipment route. If the worst allegations here are true, forged state-institute stamps and false origin labels were used to move military-relevant components to a hostile buyer over years. Fraud law protects counterparties and customs integrity. It does not address the national-security harm, and sentences tied to fraud loss may not deter a business that clears hundreds of millions of NT dollars. Prosecutors also have to prove deception each time, which is slower and less predictable than a clear prohibition.
Why precision matters more than severity
That case supports closing the gap. It does not support a broad one. Our view is that Taiwan should criminalize the specific conduct, knowingly exporting or re-exporting listed items to listed destinations or end users in breach of a licensing requirement. It should avoid sweeping offenses that reach ordinary distributors.
Three design principles follow.
- Define the controlled list in administrative rules, with a published process. The International Trade Administration of the Ministry of Economic Affairs already administers strategic high-tech commodity export controls. A criminal clause should attach to that list, not to a vague category such as "AI chips." Chip performance thresholds change quickly, and legislators should not freeze them into statute.
- Require knowledge or willful blindness. Distributors move thousands of parts and cannot trace every downstream buyer. Liability should turn on what a seller knew or deliberately ignored, as the prosecutors allege here, not on strict liability for a customer's later resale.
- Offer a compliance safe harbor. Firms that run documented end-user checks, screen against the entity list and report suspected diversion should be treated as partners. Penalty design that punishes diligent exporters will push legitimate trade elsewhere.
The NCSIST detail shows why verification systems also need to be hard to forge. A paper stamp was apparently enough to defeat the check. Electronic end-user certificates held by the licensing authority, and direct confirmation with named end users, would be cheaper and more effective than higher sentences after the fact. That mirrors the anonymous source quoted by the Taipei Times, who called for prevention-focused mechanisms rather than reliance on punishment after violations.
What to watch
Two things will show whether Taiwan's response is proportionate. The first is whether the amendment, proposed in June, is actually tabled with a defined list and a mental-state requirement. The second is whether the Ministry of Economic Affairs publishes clearer end-user verification procedures. A well-drafted law protects Taiwan's access to US technology and its own semiconductor industry. A hasty one risks burdening the legitimate exporters that make that industry work, while the forgers it targets simply find a new stamp.