If passed, routing Nvidia-based servers from Taiwan to Chinese buyers through third countries would risk prison terms of up to 10 years, raising compliance costs for Taiwanese server sellers.
Taiwan’s legislature has taken its first formal step toward making unlicensed exports of advanced chips to China a crime. On November 2, the Legislative Yuan’s Economics Committee held a public hearing on a draft amendment to the Trade Act, proposed by legislators of the ruling Democratic Progressive Party (DPP). According to the Economic Daily News, a new Article 13-2 would require government permission before "specific integrated circuits, key semiconductor wafer materials, components and manufacturing equipment" can be exported to mainland China. A new Article 27-3 would set penalties of up to 10 years in prison.
Violators would face up to 10 years in prison and fines of NT$5 million to NT$10 million, with the same penalties for goods routed to China through a third country. Illegal gains would be confiscated. That third-country clause is aimed squarely at the way restricted hardware has actually reached Chinese buyers: through intermediaries in other markets.
The bill has not passed, and its path is uncertain. Asia Times noted that the opposition Kuomintang (KMT) and Taiwan People’s Party (TPP) together hold a majority in the Legislative Yuan, and neither has publicly stated a position.
The amendment targets a loophole exposed by the Nvidia server case
The push follows a case that Taiwanese prosecutors could only pursue indirectly. In August 2026, prosecutors in Keelung indicted nine people, including the general manager of Taiwanese firm Flying Tiger Technology and staff at the local units of Nvidia and Super Micro Computer, Asia Times reported. The group allegedly diverted 74 Nvidia B300 servers to Chinese buyers and earned more than NT$600 million (about US$18.5 million).
None of the nine faced an export charge. Prosecutors relied on breach of trust and document forgery, built around fake end-user papers, because selling the servers to China broke US export rules but not Taiwanese law. EastFrontier earlier covered how the probe widened after Taiwan detained Super Micro employees.
The government side signaled support without endorsing the bill outright. The Ministry of Economic Affairs (MOEA) said its International Trade Administration is studying how to widen controls on advanced semiconductors under its existing legal authority and that it respects the legislative proposal, according to the Economic Daily News. William Liu, director-general of the International Trade Administration, told the hearing the ministry is studying a fuller package of controls and working with overseas partners against evasion tactics such as shell companies and mislabeled chips, Asia Times reported.
Industry and lawyers ask for predictable rules
The hearing exposed a split over how far the law should go. Three representatives of TSMC attended but did not speak during the session, the Economic Daily News reported. Committee chair Chung Chia-pin apologized that companies in the Hsinchu Science Park had received the hearing notice too late to submit views.
Several lawyers argued that the MOEA’s existing export controls are already strict and that the government could adjust the list of controlled items administratively instead of writing new offenses into law. Tseng Hao-wei of Dacheng Taiwan Law Firm said exporters often cannot know whether overseas customers re-route goods, so intentional and unknowing conduct should carry different liability. Kuan Yu-cheng of Dingli Law Firm said tracing where chips end up would be hardest and costliest for smaller Taiwanese firms. Cheng Yu-fan of Fajun Law Firm said a typical company’s exports run to roughly US$2 million to US$3 million, so penalties of this size could put a business’s survival at risk.
Liu Meng-chun, director of the First Institute at the Chung-Hua Institution for Economic Research, described the amendment as a declaratory policy that responds to US concerns. Because the industry is spread across many countries, he said, enforcement may fall short.
The ministry has a faster route that carries lighter penalties
Even if the bill stalls, controls could still tighten. The MOEA could add AI servers and high-end chips to its export-control list by public notice, Asia Times reported, a route that would carry penalties of up to five years. At present, exports to China are restricted for only 12 categories of wafer-fabrication equipment, according to the same report.
What only legislation can do is double the maximum sentence to 10 years, explicitly cover third-country routing and make confiscation mandatory. Economy Minister Kung Ming-hsin said in July that the ministry would review existing export limits on chipmaking equipment to China, but that any expansion touches industry interests and needs study across ministries, the Economic Daily News reported.
The next signal is whether the KMT and TPP take a position before the committee schedules a review of the draft articles. A ministry notice adding AI servers to the controlled-goods list would show the government moving ahead without waiting for the legislature.