For years, Taiwan has viewed its dominance in supplying countries with cutting-edge chips as a shield from Chinese aggression. Now, officials are testing out semiconductors as a diplomatic sword.
On Tuesday, Taipei for the first time unilaterally imposed semiconductor export controls on a country, limiting shipments to South Africa for actions that "undermined our national and public security.” That marked the latest twist in a long-running spat over the nation’s efforts to weaken ties with Taiwan — a key demand of Beijing from its formal partners.
Taipei’s chip curbs reflect its strategy to increasingly use economic and trade policy for diplomatic goals, according to a Taiwanese official familiar with the matter. Similar measures could be imposed on other unfriendly nations, the person added, asking not to be identified discussing sensitive issues.
"By utilizing Taiwan’s position in the global chip supply chain, this looks like Taipei’s attempt at building an autonomous deterrent on the world stage,” said Wen-ti Sung, non-resident fellow at the Atlantic Council’s Global China Hub. "Going forward, other governments will be looking at this example and considering not only Taiwan’s carrots but also its potential sticks.”
While Taiwan likely wouldn’t wield such restrictions against major European economies or its main military backer the U.S., President Lai Ching-te’s decision to target smaller partners could amplify broader concerns over its dominance of chips, including in the U.S. Then Commerce Secretary Gina Raimondo in 2022 compared America’s dependence on Taiwan for chips to Europe’s reliance on Russian oil. "We cannot afford to be in this vulnerable position,” she told CBS.
Replicating Taiwan Semiconductor Manufacturing Co.’s capabilities would require time and resources beyond the scope of most of the island’s trading partners, but Washington’s actions provide one alternative. The U.S. is already diversifying its supply chain, both by incentivizing TSMC to build plants on American soil and supporting its own chip industry.
Export controls on semiconductors and chipmaking equipment have become a central battleground between the U.S. and China in recent years, with Washington pressuring allies including the Netherlands, South Korea and Japan to adopt policies despite their potential to hurt domestic companies. That’s ramped up the need for countries to maintain a degree of supply chain self-reliance, even from friendly partners.
China is perhaps most exposed to Taiwan’s controls, as Lai becomes more assertive in countering Beijing’s aggression. Earlier this year, Taiwan blacklisted Chinese tech giants Huawei Technologies and Semiconductor Manufacturing International from accessing crucial chip plant construction technology, signaling a willingness to ramp up its use of trade tools.
Chinese Foreign Ministry spokesman Guo Jiakun said Wednesday at a regular press briefing in Beijing that Taiwan had "deliberately destabilized global” supply chains with its action against South Africa. "We stand ready to expand cooperation in various fields, including chips,” he added.
The South Africa policy is still in its "notification period,” according to Cathy Fang, an analyst at the Research Institute for Democracy, Society and Emerging Technology in Taipei, suggesting the government was leaving room for negotiation and could makes tweaks, if necessary.
"The global push for domestic semiconductor manufacturing has already been under way for some time and is driven by broader strategic concerns,” she added, downplaying the potential impact of skirmishes like the one with South Africa.
The spat in South Africa, which cut official ties with self-ruled Taiwan in 1997, centers around Taipei’s de facto embassy in the country.
Taiwan said South Africa began pressuring it to relocate its office from the capital to Johannesburg in 2023, shortly after hosting a BRICS summit attended by Chinese leader Xi Jinping. In recent months, South Africa has been intensifying its request as it prepares to hold the Group of 20 leaders’ meeting in November, which Xi is expected to attend.
A separate Taiwanese official, who asked not to be named due to the sensitivity of the matter, said the chip curbs were intended to get the government in Pretoria to negotiate with Taiwan over the office move.
South Africa relies significantly on foreign carmaking plants for its economic growth. While Taiwan’s actions could affect those operations, the official added such companies generally sourced semiconductors through global automakers rather than directly from manufacturers in Taiwan — a signal the curbs weren’t intended to apply maximum pain.
Underscoring the somewhat symbolic nature of the action, official data from Taiwan show that last year it exported to South Africa roughly $4 million worth of the goods included on the export suspension list.
Taiwan only has 12 official diplomatic partners left, as Beijing pressures countries to sever ties in exchange for relations with the world’s No. 2 economy. But even informal exchanges with other nations are under growing scrutiny.
The Foreign Ministry in Taipei earlier this week blasted Beijing for what it called "brutal interference” in allegedly blocking a Taiwanese art exhibition in Kazakhstan. Days earlier, protesters waving People’s Republic of China flags appeared outside the opening of an exhibition in the Czech Republic, showcasing items from Taiwan’s National Palace Museum.
William Yang, a senior analyst for North East Asia at the International Crisis Group, described Taiwan’s response to South Africa’s demands as simply "self defense,” which could inspire solidarity in some parts.
"The move might even push like-minded democracies to deepen supply chain cooperation with Taiwan,” he added.
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