Taiwan proposes up to 10 years in prison and $10 million in fines for chip smuggling
Key Facts
A lawmaker from Taiwan’s Democratic Progressive Party introduced an amendment that would expand controls on semiconductor-related exports to China, proposing prison terms of up to 10 years and a fine of between 5 million and 10 million Taiwan dollars. The proposal covers specified integrated circuits, materials, components and manufacturing equipment related to semiconductors, rather than all advanced chips. It would also extend the proposed penalties to transfers through a third country, resale or any circumvention route. The Economy Ministry said it was studying an expansion of controls and respected parliament’s right to amend the law. The proposal comes as Taiwan seeks to close enforcement gaps in restrictions on artificial intelligence technology exports, following cases involving suspected diversion of servers and chips to China.
The proposal put criminal liability at the center of the debate: the proposed penalty would cover not only direct exports but also transfers through an intermediary or resale. In June, Bloomberg reported that Taiwan did not consider exporting AI chips to China without authorization a crime, limiting the scope for prosecution under local laws. The report said expanded restrictions could, for the first time, allow the smuggling of AI chips to China to be prosecuted as a criminal offense. The bill targets specific categories of semiconductor-related products, making the rules’ scope dependent on which circuits, materials and equipment are placed under control. The ministry’s position, as reported, combines consideration of expanded controls with recognition of parliament’s right to amend the law.
The debate followed accusations in August 2026 against 9 people for illegally exporting advanced AI servers to China, including one person linked to Nvidia and two linked to Super Micro, according to the Associated Press. In the same case, prosecutors sought the maximum prison sentence, 5 years, for four of the accused. The gap between the sentence sought in that case and the penalty proposed in the amendment is notable: the proposed maximum is 10 years. Authorities described the case as involving allegations of illegal exports; those allegations do not constitute a final judgment against the accused. The proposed provisions on transfers and resale would give the bill a scope beyond direct shipments from Taiwan, covering routes that may pass through a third country.
The move is part of a broader effort to tighten controls on advanced chips. Washington began imposing restrictions on advanced Nvidia exports to China in 2022 and tightened them in subsequent years, according to the Associated Press. In April 2025, the United States required licenses to export H20 chips to China, before later allowing some sales to resume in the same year. In June 2026, Taiwan’s Economy Ministry said Taiwan and the United States were continuing consultations on placing advanced chips under regulatory controls. Those consultations put Taiwan’s proposal in the context of ongoing trade coordination between the two sides, while details of the controls’ scope and enforcement mechanisms remain under study. The U.S. background shows that chip restrictions have evolved in stages, while Taiwan’s proposal also addresses materials, manufacturing components and re-export routes.
The Economy Ministry said in June that drafting the amendments required coordination among government agencies, that identifying the chips subject to controls required the participation of scientific authorities, and that implementation would involve customs and trade oversight agencies. This puts product identification on a separate track from enforcement after the restrictions are adopted, including a role for technical agencies in defining the scope and for customs and trade oversight bodies in applying it. The ministry said identifying which chips should be regulated “must include the scientific authorities,” and that implementation “requires the participation of customs and trade oversight agencies.” The proposal alone does not specify the final products that would be subject to controls; that depends on the consultation and technical identification process. Nvidia closed at $216 on October 26 and $204.64 on October 30, according to EL7 data.