A recent move that may have escaped wider attention could carry long-term consequences for the global chip supply chain. Taiwan has added China's top foundry, Semiconductor Manufacturing International Corp (SMIC), and telecommunications giant Huawei to its export control list, effectively banning them from doing business with Taiwan's critical semiconductor sector.
While largely symbolic, given that US sanctions have already restricted leading Taiwanese chipmakers, such as TSMC, from supplying advanced technology to these firms since 2019, the decision comes amid escalating geopolitical fault lines in the global semiconductor landscape.
Analysts tracking the Indian semiconductor industry caution against brushing off the implications.
"Hundreds of players outside China, from US-allied EU and Western stack nations, have also been placed on Taiwan's Entity List for chip export controls simply because they indirectly acted as subsidiaries of Chinese firms to source semiconductor supplies," said Dr. Danish Faruqui, CEO of US-based Fab Economics, a consultancy focused on greenfield fabs, OSAT, and semiconductor investment advisory.
"Thus, there is a risk for any nation or semiconductor player to be excluded from Taiwan's dominant memory and logic semiconductor value chain if found to be indirectly supplying China," Faruqui warned.
The India situation
For India, the risks appear minimal, but that may only be for now. India–Taiwan relations have a decades-long history of healthy ties and technology exchange, along with India's consistent position as a strong US-allied nation.
Therefore, the risk of India being affected by any future export controls from Taiwan's International Trade Administration may seem very low.
That said, the broader geopolitical climate remains volatile. "Nothing is impossible for US and allied nations like Taiwan when it comes to expanding export controls on future indirect supplier entities to China, in order to further impair the People's Republic of China's (PRC) capability to produce advanced-node semiconductors that could be used in the next generation of advanced weapon systems and artificial intelligence (AI) applications," Faruqui noted.
He added that both compute and memory chips, essential components for AI products, are made in Taiwan. "It is imperative for both the US and Taiwan to enact watertight sanctions and export controls globally on outbound semiconductor supply from Taiwan, thereby creating both compute and memory walls for China, which have significant military applications."
Fab Economics, together with the Global Semiconductor Policy Council (GSPC), a think tank that analyzes semiconductor geopolitics and policy across 13 global clusters, has urged emerging chip nations like India to act swiftly.
"It is of existential importance to develop adequate semiconductor export controls and an implementation framework to decouple from China and other nations on the US Department of Commerce Entity List," Faruqui said. "Otherwise, in the absence of such controls, some firms may inadvertently become indirect suppliers of leading-edge hardware to China."
He cited past cases as cautionary examples. GlobalFoundries and TSMC have, over the last year, been duped into supplying chips to China via subsidiaries, leading to inadvertently becoming China suppliers and later facing immense penalties.
"We advise that India should promptly and proactively develop its own Semiconductor EARs (Export Administration Regulations)," Faruqui noted.
Export control risks
India's ambitions to develop 3nm chip design capabilities and its growing footprint in high-performance computing through GPUs from firms like NVIDIA and AMD may also warrant a strong export control regime, Faruqui argued.
"In scenarios where India-designed 3nm leading-edge hardware ends up in nations on Taiwan's Export Control Entity List, it could lead to a ban by TSMC on fabricating such products for those design players," he warned.
Faruqui outlined three key risks that India should consider:
Risk type 1: leading-edge fabrication blockade
India currently lacks domestic foundry capacity for advanced node chips and relies on TSMC for fabrication and packaging. Without a formal export control framework, there is a risk that Indian firms could lose access to Taiwan's semiconductor supply chain if found indirectly supplying China.
Risk type 2: technology licensing blockade
India's only potential fab for the moment depends on licensed technology from Taiwan's PSMC. Faruqui advised that India navigate export control risks strategically by deploying domestic semiconductor export regulations.
Risk type 3: academic and research blockade
Taiwan has already sanctioned seven Chinese universities, known as the "seven sons of national defense," linked to the Chinese Ministry of Industry and Information Technology. Academic collaborations with these institutions have been prohibited to prevent leakage of sensitive technologies. Faruqui recommended that India introduce AI-focused semiconductor export control rules for academic exchanges to avoid similar blockades in the future.
With AI, defense applications, and advanced computing emerging as focal points of global semiconductor policy, the stakes have never been higher. For India, the window to align policy with strategic goals before geopolitical lines harden further may be narrow.
Article edited by Jack Wu
