Global policy shifts deepen semiconductor divide

At the same moment Taiwan regulators blacklisted Chinese chip firms Huawei and SMIC, lawmakers in the U.S. were drawing up plans to increase domestic semiconductor investment tax credits. Though separated by geography, the moves reflect a coordinated pivot in the chip sector. Around the world, countries are working to decouple their chip strategy from China, reinforcing a tectonic geopolitical realignment of the semiconductor supply chain. Procurement and strategy leaders must now consider how each sourcing decision accounts for both policy alignment and incentive optimization.  

Taiwan’s blacklist expands amid growing U.S. alignment

In a move with sweeping implications for the global semiconductor supply chain, Taiwan’s Ministry of Economic Affairs expanded its trade blacklist. The agency added both China’s Semiconductor Manufacturing International Corporation (SMIC) and Huawei to its strategic high-tech commodities entity list, blocking Taiwanese companies from doing business with either firm without first obtaining government approval. It’s a strong political signal that further aligns Taipei’s export control policy with that of the United States.  

Taiwan’s decision to blacklist Huawei and SMIC is particularly consequential due to its foundational role in multiple levels of semiconductor manufacturing. The island is home to not only chip titan TSMC but also serves as a global hub for advanced packaging and production tools for sub-14nm nodes. Notably, TSMC already aligns its business practices with U.S. export regulations, but now other chipmakers will need to do the same.  

From a technical perspective, the impact is most severe for China’s ambitions in AI and industrial automation. SMIC has struggled to move beyond the 7nm node without advanced EUV machinery from ASML. Without access to Taiwan’s advanced packaging services and critical deposition and etching tools, SMIC’s production roadmap could stall further. Huawei, which has persevered despite being cut off from leading-edge chips for years, now faces another choke point in sourcing custom silicon and design services from partners in Taiwan.  

The move marks a departure from Taiwan’s previously ambiguous posture toward China’s tech sector. Taiwanese firms have helped Chinese companies sidestep export bans for years. However, Taipei’s regulators have made it clear they now view advanced chip sales to China as a matter of national and economic security. Even so, the move raises the risk of retaliatory measures from Beijing that could fragment the global supply chain.  

The timing is also noteworthy. Taiwan’s Ministry of Economic Affairs made its announcement just days after President Trump escalated tariff threats and floated the idea of taxing semiconductors made in Taiwan but sold in the U.S. While Taipei insists its recent blacklist is independent of U.S. pressure, its alignment with Washington’s moves to decouple the semiconductor supply chain from China can’t be overlooked.  

For procurement leaders, the implications of this move are immediate. Organizations relying on Chinese ODMs may face longer lead times and sudden cost increases. Meanwhile, Taiwanese suppliers working with U.S.-based customers must now navigate a more complex trade environment with additional restrictions.  

U.S. semiconductor tax incentives to grow under Trump-backed bill

The draft tax bill making its way through the U.S. Senate seeks to increase the CHIPS Act’s 25% federal investment tax credit for investments in domestic semiconductor manufacturing to 30%. President Trump has signaled his backing of this increase and reshoring efforts have had strong bipartisan support among lawmakers.  

The increased credit would apply to projects that commence construction before the CHIPS Act’s current 2026 deadline, encouraging swift action from chipmakers. Importantly, the legislation also allows for continued eligibility even if construction extends beyond that cut-off in order to support fab projects with long lead times.  

For a policy that began with bipartisan ambitions, the tax credit’s proposal reflects an evolving political consensus around domestic chip strategy. While Trump has been vocal in his criticism of direct subsidies, and indeed called to repeal the CHIPS Act, he appears to favor the tax-based incentives as a vehicle to drive investment in the U.S. chip sector.  

Countering China’s heavy subsidization of its own domestic industry is certainly a motivation behind the higher incentive. As the U.S. seeks to limit Chinese access to advanced chips while bolstering its own capabilities, lawmakers are attempting to level the playing field with preferential tax treatment. This latest move is evidence of an intensifying battle playing out between the world’s two largest economies over both market share and technological sovereignty.  

Industry experts believe the additional 5% credit could materially influence capital allocation decisions from the world’s biggest chipmakers. With fabs costing billions of dollars, even a modest improvement in tax treatment can tilt boardroom calculus in favor of the U.S. over more traditional expansion zones in Asia.  

For OEMs and EMS providers, the policy’s downstream effects are just as significant. A larger domestic fab footprint improves supply chain resistance, reduces exposure to geopolitical risk, and can shorten lead times. But to capture these benefits, procurement teams need to work with partners who understand the compliance requirements tied to federally incentivized production to ensure components are sourced through approved domestic channels.  

Sourceability enables customers to engage with vetted U.S.-based suppliers and develop resilient domestic sourcing strategies. As the American tax code becomes a more powerful lever in semiconductor strategy, Sourceability can help you stay ahead of the curve and navigate new incentives through compliant procurement strategies.