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In what Beijing may view as a sharp escalation in the tech trade war, Taiwan blacklisted Chinese tech giants, Huawei and Semiconductor Manufacturing International Corp. (SMIC), dealing a major blow to the two companies spearheading China’s efforts to develop cutting-edge AI chip technologies.

As Bloomberg first reported, Taiwan’s International Trade Administration included Huawei, SMIC, and several of their subsidiaries in an update of its so-called strategic high-tech commodities entity list, according to the latest version that was made available on its website on Saturday, although the organization didn’t publicly announce the change.

According to Taiwan’s existing regulations, local companies will require approval from the island’s government before they can ship anything to users on the entity list. 

The new restrictions imposed by Taiwan will at least partially cut off Huawei and SMIC’s access to Taiwan’s plant construction technologies, materials, and equipment essential to build AI semiconductors, like those made by Taiwan Semi for the likes of Nvidia. 

In Huawei’s case, several of its overseas units including in Japan, Russia and Germany were also captured in the update to Taiwan’s entity list. Both Huawei and SMIC, and some of their subsidiaries, are already on the US entity list, which has significantly limited the companies' ability to acquire foreign technology.

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. 

While Taiwan has for years imposed certain blanket bans on the shipments of critical chipmaking equipment including lithography machines to China, it hasn’t included leading Chinese tech companies or chipmakers on its entity list previously. TSMC, the go-to chipmaker for Apple Inc. and Nvidia, cut off its supplies to Huawei in 2020 because of US export controls.

Huawei, together with SMIC, shocked American politicians in 2023 by releasing an advanced, made-in-China 7-nanometer chip. While the two are struggling to improve their technologies due to various curbs, they are still China’s best hope to help fill in the AI chip gap left by a lack of Nvidia’s most sophisticated semiconductors.

Tensions between Taiwan and China also stepped up a notch earlier this year after Taiwan President Lai Ching-te 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.

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