Amid TSMC-Terafab Talks, Taiwan Said To Be Mulling Greater Curbs On AI Chip Sales To China

Taipei moves to tighten enforcement as TSMC expands U.S. ambitions and AI chip demand remains strong.

• Taiwan plans to bring AI chip and server export rules closer to U.S. restrictions.
• TSMC is discussing a potential role in Musk’s Terafab project as it invests $265 billion in U.S. chip manufacturing.
• TSMC expects quarterly sales growth of 61% after reporting a 51% jump in Q3 revenue, easing concerns about AI chip demand.

Taiwan is preparing to tighten export controls on advanced AI chips and servers shipped to China, bringing its rules closer to U.S. restrictions, Bloomberg reported on Friday, citing a senior official in Taipei.

Taiwan’s Minister of Economic Affairs Kung Ming-hsin told Bloomberg News in an interview earlier this week that the government plans to add AI servers and advanced semiconductors to its list of controlled items. 

Once the new rules take effect, unauthorized shipments of restricted AI hardware to China would become a criminal offense under Taiwan’s Foreign Trade Act. He did not provide a timeline for implementation.

Taiwan is home to Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s biggest contract chip-maker and a key producer of Nvidia chips.

Despite U.S. restrictions on advanced AI chip exports to China, Bloomberg reported that Nvidia processors have continued to reach Chinese buyers through alleged smuggling networks operating across Southeast Asia.

Taiwan does not currently treat unauthorized AI chip exports to China as a criminal offense, and the proposed measures would significantly tighten Taipei’s enforcement efforts, according to the report.

Taiwan’s TSMC Grows US Presence

The development comes as TSMC is pouring $265 billion into setting up chip-making operations in the U.S. amid a push from U.S. President Donald Trump to bring advanced chip manufacturing onshore. TSMC is also exploring a partnership with Elon Musk’s Terafab project, TSMC CEO C.C. Wei and Musk have confirmed.

“We are still in discussion, let me say that,” Wei told analysts on TSMC’s analyst call following its results release on Thursday, referring to discussion with Musk over Terafab. “But the fab has got to be run by TSMC.”

The comments came a week after Musk appeared to rule out an operational role for the Taiwanese chipmaker at Terafab. Musk had said his companies would build and operate the facility themselves, adding that TSMC could potentially sublease part of the planned site but would not run its manufacturing operations.

TSMC separately confirmed a Reuters report saying it is considering fabs in Texas but offered no new information.

TSMC Q3 Results

TSMC projected 61% sales growth for the ongoing quarter this week, after posting a 51% rise in Q3 sales that topped Wall Street expectations. 

With semiconductor firms ASML Holding NV and Samsung Electronics also reporting strong results in recent weeks, TSMC's report allayed fears of a slowdown in AI-led chip demand.

“We have not modeled the purported Texas cluster as nothing has been agreed yet, but long-term upside is enormous. We estimate matching the full scale of Tesla's Terafab would triple TSMC's effective capacity,” Morningstar analysts said in their note.

The research firm maintained its price target of T$3,440 and $534 on the Taipei- and U.S.-listed shares, respectively.

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