Taiwan joined a yearslong U.S. campaign to curtail China’s technological ascent when it blacklisted the country’s AI and chipmaking champions, an unprecedented step that may signal a resurgent effort to isolate its powerful neighbor’s semiconductor sector.

Taipei in June added Huawei Technologies Co. and its main chipmaker Semiconductor Manufacturing International Corp. to its entity list, barring the island’s firms from doing business with the pair without a license. It was the first time Taiwanese officials have used that blacklist to sanction major Chinese firms, taking a cue from a longstanding U.S. approach of blocking access to advanced technologies. 

The move also marks Taipei’s first public action on semiconductor restrictions since President Lai Ching-te pledged in April to address unspecified concerns from Washington about export controls. President Donald Trump’s administration has urged Taipei to take more ownership over chip restrictions on China, people familiar with the matter said, with a particular focus on enforcement of existing curbs. They requested anonymity as they weren’t authorized to speak publicly. 

A congressional committee focused on China, meanwhile, said after Taipei’s move that the U.S. “must continue working with our partners to ensure the CCP’s attempts to illegally transfer tech are stopped cold.”

Taipei’s decision may be the first of a series of measures tightening the flow of technology to China, marking a departure from a policy of nurturing cross-Strait business ties. The longer-term goal may be to throttle supply of the vital components, silicon materials and plant construction expertise that helped transform Taiwan Semiconductor Manufacturing Co. into the world’s most advanced chip operation. 

“This recent shift marks a substantive move toward strategic technological competition with China,” said Chiang Min-yen, an analyst at Taiwan’s government-funded Research Institute for Democracy, Society and Emerging Technology. “Compared to other tech democracies with similar industrial structures — such as Japan and South Korea — Taiwan is now taking a more decisive stance.”

Lai didn’t specify in his April comments what steps Taiwan would take in response to U.S. concerns, but instead described a broader strategy to boost trade relations with the U.S. It’s unclear whether the Huawei and SMIC sanctions are related to ongoing tariff negotiations with Washington, or whether the U.S. requested that specific step. The U.S. Department of Commerce, White House, Taiwan’s Office of Trade Negotiations and China’s Foreign Ministry didn’t respond to requests for comment.

“The DPP authorities’ kneeling and ingratiating themselves with the U.S. will only hurt and ruin Taiwan’s interests,” Foreign Ministry spokesman Guo Jiakun told a press briefing in Beijing, referring to the ruling party in Taipei. “China opposes the US politicizing tech and trade issues, overstretching the concept of national security, abusing export control and long-arm jurisdiction, and maliciously blocking and suppressing China.”

A Trump administration official, meanwhile, said the U.S. supports any steps its allies take to align with Washington policy and prevent the circumvention of controls.

The U.S. has pressured Taiwan to do more since Trump’s first term, when officials urged Taipei to block sales of TSMC chips to China — before Washington imposed restrictions on some of TSMC’s shipments to the world’s second-largest economy.

Under President Joe Biden, the U.S. continually ramped up those China controls, which span both chips and the tools used to make them. Many of the U.S. measures use an authority known as the foreign direct product rule to restrict some activities of foreign firms — including Taiwanese ones — whose products contain even the tiniest bit of American tech.

One major focus for American officials — under Trump as well as his predecessor — is ensuring that Taipei cracks down on TSMC sales that are restricted under U.S. rules, said people familiar with the matter, who asked not to be named discussing private conversations. 

In 2024, TSMC, the go-to chipmaker for Apple Inc. and Nvidia Corp., unwittingly manufactured 2.9 million AI dies for Huawei, based on estimates from researchers. Those semiconductors were routed via an intermediary that has since been sanctioned by the U.S. government and cut off by TSMC, which is cooperating with Washington’s ongoing investigation into the matter.

But there also are a host of other business activities not captured by Washington’s curbs — things like construction contracts or sales of certain components. In 2023, Bloomberg News reported that several Taiwanese companies were helping Huawei build infrastructure for an under-the-radar network of chip plants across southern China.

Taiwanese officials said they would probe into those companies shortly after, but they’ve refrained from taking significant action — until now.

It’s unusual for Beijing’s neighbors, who still see China as a crucial trading partner, to openly target its most strategic companies. While Japan joined a U.S.-led campaign to limit China’s access to advanced chipmaking equipment, neither Tokyo nor Seoul has blacklisted Huawei or SMIC entirely. 

On its face, Taiwan’s entity list action doesn’t immediately upend routine business, in part because it doesn’t apply to mainland-registered operations. Many Taiwanese companies have set up local subsidiaries to handle their business in mainland China over the years, and Taipei doesn’t have jurisdiction over such entities.

“I don’t expect this announcement will cause any material impact for either Taiwan or Huawei and SMIC,” said Bloomberg Intelligence analyst Steven Tseng. “Huawei and SMIC don’t really rely on Taiwan as they should have established a pretty decent level of ‘local sourcing’ in China after all these years.”

It’s the signal Lai is sending that’s important.

The new president has been working to reduce economic interdependence between China and Taiwan. His Democratic Progressive Party released a video over the weekend arguing that Taiwanese companies should look to diversify away from China — a shift from decades of the island’s firms establishing a substantial presence on the mainland. Foxconn Technology Group built the world’s largest iPhone assembly campus in central China, while TSMC runs chipmaking sites in Shanghai and Nanjing. 

Tensions escalated after Lai was elected last year. Beijing has accused him of seeking independence and destabilizing the region. Bilateral ties were further strained after Lai labeled China a “foreign hostile force” for the first time and unveiled wide-ranging measures to counter infiltration efforts. China claims the self-governing democracy is its territory and has vowed to unify with Taiwan, using force if necessary — a stance Taiwan rejects.

Taiwan’s annual investment in China peaked at $14.6 billion in 2010, though that spending plummeted to $3.6 billion last year. 

“Lai will now be able to speed up his agenda-setting against China on several fronts including defense, trade and tech, thanks to the changes in the global environment,” said Soong Hseik-wen, director of the Center for National Policy Research at Taiwan’s National Chung Cheng University.