Taiwan To Criminalize Nvidia AI Chip Smuggling To China

He said the ministry was studying a full package of measures to bring high-end chips under control, giving enforcement a more appropriate legal basis and common standards. He added that this would help block illegal transshipments and safeguard Taiwan's“silicon shield” while keeping the industry internationally competitive.

He said the ministry was working with overseas partners to step up enforcement as smugglers used increasingly sophisticated methods to evade controls, including:

Laundering the origin of goods through third countries; Setting up shell companies in Southeast Asia and the Middle East; Declaring high-end AI chips as ordinary consumer chips; and Dismantling chipmaking tools, exporting the parts through different customs points and reassembling them overseas.

“The amendment is in line with the US-Taiwan reciprocal trade agreement and Taiwan's national security interests,” said Wang Guo-chen, an associate research fellow at the Chung-Hua Institution for Economic Research (CIER).“But Taiwanese firms in China could be caught in a crossfire, facing Chinese fines if they follow US law and stop selling chips there, or US export controls if they listen to Beijing.”

However, Tseng Chih-chao, deputy secretary-general of the Association for Chinese Economic and Financial Research, said the amendment may not be enough to tackle Taiwan's real security risks, as it targets only chips and related equipment and materials.

“Why does this amendment single out mainland China when the trade agreement with the US also covers North Korea, Iran and Russia?” he said.“If the current system has loopholes, the government should fix the general control mechanism rather than pass a law that is merely a policy statement.”

He said the Foreign Trade Act already allowed the ministry to designate controlled goods and destinations by public notice, while its entity list covered more than 11,000 entities. He added that adjusting those notices would be more flexible and efficient than writing specific countries and technologies into law.

Since 2024, Nvidia-powered servers have repeatedly slipped through Taiwan and into China via Thailand, Indonesia, Japan and Hong Kong, but most smugglers were only exposed this year.

In March 2026, the US Department of Justice charged Super Micro co-founder Yih-Shyan“Wally” Liaw, the company's Taiwan sales manager Ruei-Tsang“Steven” Chang and contractor Ting-Wei“Willy” Sun with conspiring to divert US-assembled servers containing restricted Nvidia chips to China. Liaw and Sun were arrested in California, while Chang, a Taiwanese citizen, remains at large.

US prosecutors said about US$2.5 billion worth of servers were sold to a Thailand-based company in 2024 and 2025, with at least US$510 million diverted to China between late April and mid-May 2025. To pass a compliance check, the group allegedly placed dummy servers in Thai warehouses and used hair dryers to swap labels and serial-number stickers.

Two months later, Taiwan's Coast Guard Administration, acting on orders from Keelung prosecutors, searched 12 locations on May 20 and seized about 50 Supermicro servers worth more than US$15 million, along with luxury cars and NT$9 million in cash. Authorities detained three Taiwanese men on suspicion of forgery.

Prosecutors said the trio had shipped servers from a northern Taiwan port with export documents listing a Northeast Asian country as the destination. The country was later identified as Japan, with at least one shipment reportedly passing through Japan to Hong Kong and mainland China, the suspected final stop. The May 20 raid was the first stage of the investigation that led to the indictment of nine people in Keelung in August.

In June, media reports said Taipei was considering restricting AI chip sales to all customers in China, not just firms on its export blacklist such as Huawei, as part of its trade talks with Washington. The move would allow Taiwan to prosecute AI chip smuggling as a crime for the first time.

Last month, Economy Minister Kung Ming-hsin said the government would add AI servers and cutting-edge semiconductors to Taiwan's export-control list, making unauthorized shipments of such hardware to China a criminal offense under the Foreign Trade Act.