Taiwan plays a pivotal role in the global semiconductor supply chain and its semiconductor industry is critical to economic development.
Taiwan has therefore established a comprehensive legal framework covering intellectual property protection, controls on technology exports and outbound investments, and incentives for industrial development.
This article summarises key laws and regulations aimed at protecting advanced semiconductor technologies and promoting the domestic semi-conductor industry.
Protecting technologies
Since 2022, Taiwan has prohibited any person acting on behalf of specified foreign interests from improperly acquiring, using or disclosing trade secrets involving Taiwan’s core critical technologies through improper means such as theft or misappropriation.
Violators are subject to imprisonment of three to 12 years and fines of NTD5 million (USD156,500) to NTD100 million, which may be increased if the unlawful gains exceed the statutory maximum fine.
“Core critical technologies” refers to technologies that, if disclosed to other jurisdictions or entities, may seriously harm industrial competitiveness, economic development or other stipulated interests.
They are defined as meeting one of the following criteria:
- Technologies subject to control under international treaties, defence, or the protection of critical infrastructure; or
- Technologies that may enable technological leadership or enhance competitiveness in key industries.
The current list includes several semiconductor-related technologies including manufacturing technology for integrated circuits (ICs) or chips with processes of 14 nanometres and below, heterogeneous integrated packaging technology, high-performance chip design for AI computing, and semiconductor manufacturing technologies related to gallium nitride (GaN) and SiC silicon carbide (SiC).
Given the risk of trade secret leakage involving advanced semiconductor technologies through cross-border transactions and investments, security-related laws serve as a key legal safeguard for Taiwan’s advanced semiconductor technologies.
Investment restrictions
To prevent the outflow of critical technologies that could undermine industrial competitiveness, article 22 of the Industrial Innovation Statute, as amended in 2025, establishes a prior-approval mechanism for outbound investments based on factors such as destination, industry, technology and investment amount.The competent authority
Non-compliance may result in administrative fines or penalties ranging from NTD50,000 to NTD1 million. The company may also be ordered to cease or withdraw the investment.If the company fails to rectify the violation within the prescribed period, it may be subject to additional administrative fines ranging from NTD500,000 to NTD1 million per violation.
As this regulatory regime under article 22 has not yet formally entered into force because the Ministry of Economic Affairs has not yet issued the relevant implementing regulations, further developments should be monitored.
Given the importance of semiconductor technology to Taiwan’s industrial development, outbound investment involving semiconductor technologies is likely to be subject to this regime.
Additionally, certain cross-strait investment activities and technology co-operation are regulated under Taiwan’s Act Governing Relations between the People of the Taiwan Area and the Mainland Area.
Taiwan’s Ministry of Economic Affairs classifies industries, restricting specific semiconductor activities like manufacturing integrated circuit dies and wafers exceeding 12 inches.
Export controls
To fulfill obligations under international treaties, Taiwan’s Foreign Trade Act requires advance export permits for companies exporting strategic high-tech commodities (SHTCs).SHTCs include items on export control lists covering dual-use items and technology, military goods and some country-specific commodities (collectively, the SHTC List).
The current SHTC List includes semiconductor manufacturing equipment, device testing equipment, specialised scanning electron microscope (SEM) equipment, and cryogenic wafer-probing equipment.
The export control regime also adopts an end-use review principle. Where a transaction involves a party listed on the SHTC Entity List, or where suspicious circumstances are identified, the transaction may be treated as a high-risk transaction and subject to further review.
SHTC List items may require prior approval. Violations may result in administrative fines ranging from NTD60,000 to NTD3 million, suspension of trade privileges for one month to one year, or revocation of registration.
Tax incentives
Article 10-2 of the Industrial Innovation Statute (the CHIPS Act) offers tax incentives to companies that conduct forward-looking innovative R&D within Taiwan that plays a key role in international supply chains, which means that a company’s products or services are applied within an industry supply chain involving two or more countries or regions, and that such products or services have a significant impact at any stage of that supply chain.
“Forward-looking innovative R&D activities” refer to a company’s engagement in R&D involving internationally leading technologies or innovative applications of mature manufacturing technologies in specified fields such as semiconductors, electric vehicles, telecommunications and displays.
To ensure these incentive schemes apply only to enterprises possessing a certain level of technological capability and operational scale, several eligibility thresholds for tax incentives have been established.
For example: a company’s R&D expenditure must reach a specified scale; the ratio of R&D expenditure to its operating revenue must meet a prescribed standard; and the company’s effective tax rate must satisfy a minimum percentage requirement.
Qualified companies may claim a 25% tax credit for their expenditure on forward-looking innovative research and development, which may be credited against their profit-seeking enterprise income tax payable for the current year, subject to a cap of 30% of the income tax payable for that year.
In addition, where a qualifying company purchases new machinery or equipment for use in advanced manufacturing processes, it may claim a tax credit of 5% of the amount of such expenditure, likewise creditable against its profit-seeking enterprise income tax payable for the current year, with the same cap of 30% of the tax payable for that year.
This framework is intended to encourage enterprises to continue expanding their R&D investment in Taiwan, reinforcing its position in global semiconductor supply chains.
Takeaway
Taiwan’s semiconductor legal framework focuses on promoting industrial development and protecting critical technologies.In addition to encouraging continued corporate investment and research and development through targeted tax incentives, Taiwan maintains a regulatory framework regulating trade secret protection, technology transfers and outbound investment and co-operation.
For businesses investing, conducting research and development, or pursuing collaborations in the semiconductor sector, Taiwan’s legal and policy environment remains an important and evolving consideration. A thorough and current understanding of Taiwan’s applicable legal and regulatory framework is essential to supporting legal compliance by enabling companies to anticipate obligations and manage approval processes, and mitigate potential liabilities and legal risks. It also supports more informed decision-making. strengthens strategic planning and long-term business continuity, allowing companies to respond more proactively and effectively to regulatory developments and increasingly complex cross-border operational challenges.