US Trade Restrictions Reach Deeper Into Taiwan's Technology Supply Chain

From 60 Origin Cases to a Wider Technology Squeeze

Taiwan's Investigation Bureau announced it had cracked 60 cases of goods being falsely presented as Taiwanese, three weeks after an August White House report placed the island among its highest concern locations for disguising the origin of Chinese products. Customs authorities, meanwhile, carried out nearly 50,000 inspections over a year as enforcement expanded from Keelung to Kaohsiung.

The pressure reaches beyond customs declarations. American restrictions and investment demands are spreading across the machinery, materials, packaging and communications equipment that make advanced computing possible. Taiwanese companies now face scrutiny over where products are made, which technologies they contain and who eventually uses them.

Two figures explain the stakes in one newly exposed industry. Market research firm TrendForce estimates that Chinese manufacturers supply 56 percent of the world's optical transceivers, devices that move data through fiber optic cables. Innolight alone holds 25 percent. Restrictions affecting those businesses could redirect substantial orders, while forcing buyers to reorganize production.

Taiwanese suppliers could gain business from that shift. They also face higher costs for checking customers, documenting production and deciding whether to build factories in the United States. Smaller companies that depend on overseas distributors have fewer resources to follow products after a sale.

Why Origin Checks Are Intensifying

The White House Office of Trade and Manufacturing Policy's August report, The Great Transshipment Scam, identified more than 40 countries as risks for disguising the origin of Chinese goods. It placed Taiwan, Japan and South Korea in its Tier 1 category and claimed that such practices cost the United States more than US$100 billion annually.

Origin laundering means falsely presenting a product as coming from another country, often to avoid tariffs or restrictions. Moving goods through Taiwan does not automatically make them Taiwanese. Customs authorities examine production and documentation to determine their origin.

Chen Chi-min, a section chief at Taiwan's Investigation Bureau, described the agency's new involvement in these investigations:

Our bureau never used to handle origin-laundering cases. This is the first time,

The bureau became the third Taiwanese government agency involved in the crackdown. For legitimate exporters, the expanded inspections make accurate records of components, manufacturing and shipment routes more valuable. For investigators, those records help trace whether a declared Taiwanese product actually underwent the production claimed.

Chips Are Only One Part of the Computing Chain

Advanced packaging equipment, semiconductor materials, communications products, integrated circuit substrates and heavy electrical equipment have joined chips, wafers and servers among the industries facing growing American trade pressure. The measures vary, ranging from export restrictions and proposed import rules to requests for investment in American production.

Chris Miller, the Tufts University historian who wrote Chip War, identifies three dimensional chip stacking, interconnect technology and the performance of complete artificial intelligence systems as central to the competition for computing power. A faster chip needs efficient connections to memory, other chips and the wider network.

Advanced packaging places chips close together so they can exchange data efficiently. A substrate is the supporting base that connects a packaged chip to a circuit board. Optical transceivers handle another part of the journey, converting electrical signals into light and back again as information travels between equipment.

These connections explain why suppliers outside the best known chipmakers are receiving greater attention. A computing system depends on the equipment and materials used to assemble it, as well as the components that carry its data.

Washington Wants Substrate Factories Too

The American Institute in Taiwan invited Unimicron Technology, Kinsus Interconnect Technology and other substrate manufacturers to an early September meeting to discuss establishing factories in the United States. The aim was to support an American production chain stretching from wafer manufacturing through advanced packaging, testing and substrates.

A substrate factory would fill a different role from a wafer plant. Wafers contain the circuits from which chips are made; substrates help connect the finished chips to other electronics. Bringing both stages closer together would give customers more of the production chain within the United States.

Taiwanese manufacturers considering such investments must also assess taxes and employee assignments. At a March 5, 2025 seminar, PwC Taiwan's U.S. business lead, Su You-ren, discussed a proposed Taiwan-U.S. tax agreement covering withholding taxes, rules on when a business has a taxable presence and relief for employees on short assignments.

PwC's March 2025 statement described those benefits as dependent on passage of the proposal. Tax treatment therefore belongs alongside factory costs and customer demand in an investment decision.

Optical Equipment Faces a Production Shift

The U.S. Federal Communications Commission announced an August draft rule that would restrict imports of certain models of optical transceivers made in China. A draft rule is a proposal subject to further regulatory action. Customers have already begun asking suppliers to move production.

The chairman of a Taiwanese optical transceiver manufacturer described the requirement customers were setting for new products:

starting with the new models, production must not take place in China anymore.

TrendForce's figures show the scale of that request. Chinese suppliers, including Innolight and Eoptolink, account for 56 percent of the global market, compared with 44 percent for suppliers elsewhere. Innolight's 25 percent share alone represents nearly half of the Chinese total.

Innolight was added in June to the U.S. military's list of Chinese military companies operating in the United States, and its share price subsequently halved. The company also has production in Taiwan. Whether Washington will permit those products to enter the American market remains unresolved.

LandMark Optoelectronics, Elite Advanced Laser and FOCI Fiber Optic Communications could receive more business if customers replace Chinese suppliers. Gemtek Technology has already announced plans to produce in the United States. The eventual distribution of orders will depend on the scope of restrictions and customers' sourcing decisions.

How Taiwan Reached This Point

Taiwan's current pressures follow several years of expanding controls and closer attention to the final destinations of sensitive goods. Russia's invasion of Ukraine brought machinery and other industrial products into sharper focus before the latest scrutiny of the computing supply chain.

• April 2022: Taiwan introduced a list controlling high technology exports to Russia and Belarus following Russia's invasion of Ukraine.
• January and December 2023: Taiwan expanded those controls. The Russia and Belarus list was described as covering 57 items.
• Summer 2023: The United States stationed its first export control officer in Taiwan, Ariel Joshua Leinwand. At that time, it had only 11 such officers worldwide.
• January 2024: The Lebedev Physical Institute, already subject to American sanctions, was still absent from Taiwan's export entity management list.
• 2024: The Industrial Technology Research Institute began charging companies for strategic high technology product assessments as demand increased.
• March 5, 2025: PwC Taiwan held its seminar on export controls and the tax issues involved in American investment.

The appointment of an American export control officer gave Washington a permanent local presence focused on checking the final users and uses of products. The sanctions list gap involving the Lebedev institute also illustrated a practical problem for exporters: Taiwanese and American lists can be updated at different times.

Customs Faces a Technical Capacity Problem

The Industrial Technology Research Institute's assessment workload rose from about 1,200 cases annually to 4,000 after controls expanded. That is roughly 3.3 times the earlier volume. The increase led the institute to begin charging businesses in 2024 rather than relying entirely on government funding.

Assessments help determine whether a product's technical specifications place it within a controlled category. For a machine tool, details such as precision can matter. Establishing those details requires more than checking the product name on a shipping document.

Taiwan's customs procedures have allowed exporters that judge their goods to be outside controlled categories to submit a declaration and obtain release, followed by checks. Customs official Chang Huang-chia explained that officers primarily examine declarations and may lack the specialist knowledge needed to verify complex machinery at the border.

The International Trade Administration said cases released through that process were referred for review. It said referrals from January 4 through October 2023 involved goods outside the controlled categories. Export schedules nevertheless put pressure on officers to make decisions quickly, while later checks rely heavily on documents.

Smaller exporters bear part of this growing workload. They must establish product specifications, understand the relevant lists and retain evidence of their decisions, sometimes while relying on distributors to handle sales and maintenance abroad.

Customer Checks Now Matter as Much as Product Origin

Liu Da-nien of the Chung-Hua Institution for Economic Research warned that the Taiwan-U.S. Agreement on Reciprocal Trade, described as signed in February, extends American influence over the customers to whom Taiwanese businesses export. His concern is that companies must trace both the source of their inputs and the destination of their products.

American export controls can reach transactions outside the United States when the applicable rules cover American technology, components or production methods. Companies must determine which rules apply to their particular products, buyers and intended uses. Selling through a distributor still leaves the exporter with customer checking responsibilities.

At PwC's March 2025 seminar, National Yang Ming Chiao Tung University technology law associate professor Mark L. Shope discussed a January 2025 Bureau of Industry and Security interim final rule introducing controls on integrated circuit chips and AI model weights. Model weights are the numerical settings learned during training that shape how an AI system responds.

PwC partner Lee Yi-chen also described approval mechanisms for chip design companies and outsourced semiconductor assembly and test businesses, known as OSAT firms. She said inclusion could bring orders while requiring stricter customer checks and compliance procedures.

The commercial consequences can arrive quickly. Taiwan trade officials described a Hsinchu chip design company that lost upstream supplies and banking services after being placed on the American Entity List in 2023.

What Companies and Lawmakers Can Do

Lawyer Chen Yen-po said Taiwan often handles illicit transshipment through document forgery prosecutions, which he described as carrying light penalties. Two attempts to tighten the law failed amid difficulty defining its scope and concern about damaging legitimate businesses that divide production between Taiwan and China.

A national security source identified existing controls on 12 categories of semiconductor equipment as a possible starting point for considering broader restrictions on advanced chips and other exports to China. No timetable was given for that expansion.

Businesses already have practical options. PwC said companies can apply for the International Trade Administration's certified Internal Compliance Program. Such a program establishes written responsibilities and procedures for checking products, buyers and transactions before goods leave the factory.

Leinwand, the American export control officer, advised companies to investigate warning signs such as a buyer refusing to explain a product's use, an address shared with a listed company, an unusually high offered price or a final destination that is merely a freight business.

Checking names and addresses against screening lists, examining a buyer's business history and keeping correspondence can help document those decisions. Leinwand recommended retaining checking and communication records for at least five years. For manufacturers hoping to win replacement orders, the ability to explain where a product came from and where it is going is becoming part of the sale.

Key Points

• Taiwan's Investigation Bureau announced 60 origin laundering cases as customs enforcement expanded.
• American pressure now reaches substrates, advanced packaging, materials and optical communications, alongside chips.
• Chinese optical transceiver suppliers hold 56 percent of the global market, according to TrendForce.
• Washington has encouraged Taiwanese substrate makers to establish factories in the United States.
• Taiwan's product assessment workload rose from about 1,200 to 4,000 cases annually.
• Manufacturers face growing demands to check customers, trace final uses and preserve compliance records.