Taiwan blacklists China's Huawei and SMIC, further aligning with U.S. trade policy

Taiwan has added China's Huawei and SMIC to its trade blacklist in a move that further aligns it with U.S. trade policy and comes amid growing tensions with Beijing.

The two leading Chinese chip firms have been put on Taiwan's "Strategic High-Tech Commodities Entity List," along with many of their international subsidiaries.

Taiwan's current regulations require licenses from regulators before domestic firms can ship products to parties named on the entity list.

In a statement on its website, Taiwan's International Trade Administration said that Huawei and SMIC were among the 601 new foreign entities, blacklisted due to their involvement in arms proliferation activities and other national security concerns.

Huawei and SMIC are also on a U.S. trade blacklist and have been impacted by Washington's sweeping controls on advanced chips. Companies such as contract chipmaker Taiwan Semiconductor Manufacturing Co already follow U.S. export restrictions.

However, the addition of Huawei and SMIC to the Taiwan blacklist is likely aimed at the reinforcement of this policy and a tightening of existing loopholes, Ray Wang, an independent semiconductor and tech analyst, told CNBC.

He added that the new domestic export controls could also raise the punishment for any potential breaches in the future.

TSMC had been embroiled in controversy in October last year when semiconductor research firm TechInsights found a TSMC-made chip in a Huawei AI training card.

Following the discovery, the U.S. Commerce Department ordered TSMC to halt Chinese clients' access to chips used for AI services, according to a report from Reuters. TSMC could also reportedly face a $1 billion as penalty to settle a U.S. investigation into the matter.

Huawei has been working to create viable alternatives to Nvidia's general processing units used for AI. But, experts say the company's advancement has been limited by export controls and a lack of scale and capabilities in the domestic chip ecosystem.

Still, Huawei is believed to have acquired several million GPU dies from TSMC for its AI chips by using previous loopholes before they were discovered, according to Paul Triolo, partner and senior vice president for China at advisory firm DGA-Albright Stonebridge Group.

A die refers to a small piece of silicon material that serves as the foundation for building processors and contains the intricate circuitry and components necessary to perform computations.

The Taiwanese government's crackdown on exports to SMIC and Huawei also comes amid tense geopolitical tensions with Mainland China, which regards the democratically governed island as its own territory to be reunited by force, if necessary.

In April, the U.S. reaffirmed its commitment to support the existing status quo as China conducted large-scale military exercises off the coast of the island.

In statements reported by state media on Sunday, China's top political adviser Wang Huning echoed Beijing's position, calling for the promotion of national reunification with Taiwan and for resolute opposition to Taiwan independence.