By Lee Hsien-chih | 2025-07-01

Taiwan has blacklisted two major Chinese tech companies in a sharp policy turn that frames advanced chipmaking as a national security imperative.

In June, Taiwan's International Trade Administration (ITA) updated its Strategic High-Tech Commodities list to include Huawei and Semiconductor Manufacturing International Corporation (SMIC), along with several of their overseas subsidiaries.

Taiwanese companies will now need prior government approval before exporting any product to these entities. The updated blacklist includes Huawei affiliates in Japan, Russia and Germany, severely restricting their access to foreign technology.

Observers widely regard this move as the first time Taiwan has imposed such high-level export controls specifically targeting key Chinese technology firms.

While aligning with US export policy, the move underscores Taiwan's effort to treat semiconductors as national security assets amid China's rising tech influence.

"This recent shift marks a substantive move toward strategic technological competition with China," Min-yen Chiang, deputy director of Economic Security at the think tank Center for Technology, Democracy, and Society (DSET), told Bloomberg on June 17.

"Compared to other tech democracies with similar industrial structures -- such as Japan and South Korea -- Taiwan is now taking a more decisive stance," he added.

The ITA's revised list includes 601 entities from China, Russia, Iran and Pakistan.

The administration emphasized that these controls aim to "prevent weapons proliferation and address national security concerns," urging Taiwanese exporters to carefully assess risk.

Customs has enforced the measures at the border, and those who violate the regulations will face criminal prosecution and business sanctions.

Zhu Fenglian, spokesperson for China's Taiwan Affairs Office, responded on June 25 by accusing Taiwanese authorities of "repeatedly resorting to sinister and evil tactics" to curry favor with Washington.

"All these despicable actions are disgraceful," Zhu said when asked about Taiwan's updated blacklist.

Security concerns

The restrictions could significantly hinder Huawei and SMIC's ability to obtain Taiwan-made materials and tools essential for artificial intelligence (AI) chip manufacturing.

"Whether from the perspective of national security, industrial protection or geopolitical strategy, Taiwan clearly has a responsibility to participate in the global democratic coalition's efforts to curb China's technological infiltration," Lin Ting-hu, deputy secretary-general of the Taiwan Society of International Law, told Focus.

Lin, also a former researcher at Taiwan's National Security Council, emphasized that Taiwan cannot view China policy solely through an economic lens.

"If products from critical companies like TSMC [Taiwan Semiconductor Manufacturing Co.] end up in the hands of hostile powers, the consequences go beyond industrial losses. These components could become core parts of military systems, directly affecting [Taiwan's] security and regional stability."

The Financial Times added that Taiwan's move also supports US efforts to limit China's tech rise.

While Huawei has promoted its AI chips as Nvidia competitors, their real performance remains in doubt.

A teardown by Canadian research firm TechInsights found Huawei's latest MateBook Fold uses a 7nm SMIC processor -- a milestone for China but still three generations behind TSMC's upcoming 2nm chips due later this year.

Backchannel threat

As a global semiconductor leader, Taiwan controls the most advanced chipmaking capabilities and a wide network from cleanroom construction to material supply.

However, without strict oversight, critical technology could leak through hidden channels.

China in the past has been suspected of using a shadow network of state-backed "startups" that approach Taiwanese suppliers while serving China's core national tech firms, including Huawei, SMIC, Fujian Jinhua and ChangXin Memory.

Beyond entity listings and license controls, Taiwan must improve "product origin tracking" and "upstream verification," especially for chips smaller than 7nm, Lin said.

"These chips have potential military applications and must be treated as strategic goods under strict control," he said.

TSMC and Taiwan's entire semiconductor sector bear not only economic weight but geopolitical responsibility too.

If Huawei and SMIC still obtain Taiwan-made chips through backdoors, Taipei must act decisively to strengthen its defenses and close loopholes.

[Part I of II in a series on Taiwan's Tech Security Push]