Law as a Silicon Shield: How Taiwan’s Legal Framework Protects and Propels Its Semiconductor Industry By: You Mi Park

Law as a Silicon Shield: How Taiwan’s Legal Framework Protects and Propels Its Semiconductor Industry

Taiwan commands a central role in the global semiconductor ecosystem. 1 Its companies, including TSMC, hold a 68% market share of all global chip production, underscoring the island’s technological pre-eminence.2 But Taiwan’s technological success has a deeply legal basis.3 Behind TSMC’s rise lies a suite of carefully calibrated laws and policies that balance industrial innovation, foreign investment, and intellectual property protection.4

Taiwan’s semiconductor ascendancy is rooted in a decades-long legal architecture designed to stimulate high-technology investment.5 The foundation is the Statute for Industrial Innovation (SII), enacted in 2010 and repeatedly strengthened to support advanced manufacturing.6 The SII and its predecessor, the Statute for Upgrading Industries (SUI), provide generous R&D tax credits, accelerated depreciation for capital-intensive machinery, and targeted subsidies for strategic technologies.7 These incentives were drafted with the semiconductor sector in mind: chip fabrication requires extraordinary up-front capital, and Taiwan’s legal regime helped lower investment risk enough for private firms to scale globally.8 Amendments adopted in 2023 further expanded tax offsets for firms engaged in national-priority technologies, fortifying Taiwan’s comparative advantage.9

Taiwan’s industrial rise also depended on government–industry partnerships, most notably through the Industrial Technology Research Institute (ITRI).10 Established in 1973 under the Ministry of Economic Affairs, ITRI functioned as a state-funded incubator for frontier semiconductor research.11 Its legal mandate allowed it to commercialize publicly funded technologies, train technologists, and spin out firms.12 TSMC itself emerged from this institutional ecosystem in 1987 as a public–private joint venture supported by ITRI’s talent pipeline and intellectual-property portfolio.13 The interplay between statutory incentives and publicly directed R&D created a coherent developmental model rarely replicated elsewhere.14

Complementing these measures were foreign investment laws that selectively opened Taiwan’s market.15 Throughout the 1980s and 1990s, Taiwan permitted joint ventures and foreign participation in semiconductor manufacturing while maintaining legal restrictions on ownership of sensitive technologies.16 This “controlled openness” ensured access to capital and expertise without relinquishing strategic assets. By calibrating investment access through sector-specific regulation, Taiwan preserved national control over semiconductor know-how while still embedding itself in global supply chains.17

If Taiwan’s industrial incentives laid the groundwork for semiconductor expansion, its intellectual-property framework supplied the security needed for global firms to entrust their most valuable designs to Taiwanese foundries.18 Taiwan’s Patent Act protects inventions, utility models, and semiconductor layout designs, and its amendments up to 2022 strengthened examination standards and enforcement remedies.19 Even more critical for the chip industry is the Trade Secrets Act, which criminalizes the misappropriation of proprietary manufacturing processes — the crown jewels of advanced-node fabrication.20 Amendments enacted since 2013 introduced heightened penalties for economic espionage and broadened extraterritorial jurisdiction to counter cross-border technology theft.21 Together, these statutes reassure foreign clients that Taiwan is among the safest places in the world to house sensitive IP.22

Taiwan’s credibility is enhanced by its compliance with international IP norms.23 Upon joining the World Trade Organization in 2002, Taiwan fully incorporated the requirements of the TRIPS Agreement, modernizing its statutory language and establishing specialized IP courts with technical examiners.24 Taiwan has also been an active participant in WTO transparency and dispute-settlement mechanisms, demonstrating legal predictability valued by multinational investors.25 This combination of domestic rigor and international alignment has helped make TSMC a trusted manufacturing partner for companies such as Apple, Nvidia, and AMD, none of which would risk the leakage of chip architectures or process recipes to global competitors.26

Robust enforcement has also played a strategic role in deterring technology poaching from mainland China.27 Taiwanese authorities have prosecuted several high-profile cases involving attempts to exfiltrate 2-nanometer-class manufacturing know-how, invoking both the Trade Secrets Act and National Security Act.28 These actions signal that Taiwan treats semiconductor intellectual property not just as an economic asset but as a national security priority, which in turn strengthens both domestic firms and foreign investor confidence.29

Taiwan’s legal posture on exports sits at the intersection of commercial openness and national security.30 The island operates a domestic export-control regime administered by the Ministry of Economic Affairs (MOEA) and the Bureau of Foreign Trade, built on the Foreign Trade Act and supplemented by sector-specific regulations that require licenses for dual-use and military-end-use items.31 In practice, Taipei has moved to restrict shipments of semiconductor equipment and certain chip components to designated Chinese firms, expanding its own entity-blacklist and license requirements in recent years.32 The legal mechanism is administrative licensing rather than blanket prohibition, allowing Taiwan to calibrate exports case-by-case while signaling alignment with allied security objectives.33

Finally, Taipei’s export-control push has a defensive dimension.34 By using administrative blacklists and penalties under the Foreign Trade Act, Taiwan can impede technology transfers to PRC actors and prosecute illicit procurement networks.35 The legal tools are reinforced by a strengthened national-security apparatus, including amendments to the National Security Act, which impose criminal penalties on economic espionage.36 This combination of export licensing, criminal enforcement, and intergovernmental cooperation demonstrates how legal frameworks can operationalize strategic restraint without wholesale decoupling from global supply chains.37

Scholars and policymakers often describe Taiwan’s semiconductor dominance as a “Silicon Shield”, made with technological advances buttressed by law. 38 Through a calibrated mix of industrial statutes, robust IP and trade-secret protections, targeted export controls, and international legal coordination, Taipei has fashioned a resilient economic ecosystem that doubles as a strategic asset.39 For small democracies aspiring to technological sovereignty, Taiwan’s experience suggests a replicable blueprint: couple industrial incentives with enforceable legal safeguards and use law as an instrument of diplomacy.40 As supply chains fragment and strategic competition intensifies, Taiwan’s legal model shows how economic law can be repurposed into a form of national defense, balancing the yin of security with the yang of growth and openness.41

 1 Isabel Hilton, Taiwan Makes the Majority of the World’s Computer Chips. Now It’s Running Out of Electricity, WIRED (Oct. 5, 2024), https://www.wired.com/story/taiwan-makes-the-majority-of-the-worlds-computer-chips-now-its-running-out-of-electricity/#:~:text=One%20of%20them%2C%20the%20Taiwan,of%20all%20global%20chip%20production.

2 Id.

3 STATUTE FOR INDUSTRIAL INNOVATION, 2010, Min. of Economic Affairs (Taiwan), https://www.moea.gov.tw/Mns/english/Policy/wHandPolicy_File.ashx?file_id=91.

4 Id.

5 Id.

6 Id.

7 Id.; STATUTE FOR UPGRADING INDUSTRIES, 1990, Presidential Decree (Taiwan), https://www.moea.gov.tw/Mns/dir_e/investment/wHandDirApply_File.ashx?file_id=378.

8 Li-Li Chou, Taiwan: Corporate - Tax credits and incentives, PWC Worldwide Tax Summaries (Jul. 3, 2025), https://taxsummaries.pwc.com/taiwan/corporate/tax-credits-and-incentives.

9 Department of Information Services, Cabinet approves draft amendments to Statute for Industrial Innovation, EXECUTIVE YUAN (Nov. 17, 2022), https://english.ey.gov.tw/Page/61BF20C3E89B856/e68f4b83-e22b-4587-9d9a-b0bb3a3de5da.

10 ITRI Overview, INDUSTRIAL TECHNOLOGY RESEARCH INSTITUTE,

https://www.itri.org.tw/english/ListStyle.aspx?DisplayStyle=20&SiteID=1&MmmID=617731521661672477 (last visited Oct. 12, 2025).

11 Id.

12 Id.

 13 Datin Sri Azleen Osman Rani, From Smart Policies to Smart Capital: Strengthening Malaysia’s Semiconductor Ecosystem, ICMR (May 29, 2025), https://www.icmr.my/from-smart-policies-to-smart-capital-strengthening-malaysias-semiconductor-ecosystem/.

14 Id.

15 Yvonne Hsieh, Gary Chen, Yuanyuan Lo, Taiwan: stringent approach to foreign investments sparks uncertainty for multinationals, GCR (Oct. 23, 2025), https://globalcompetitionreview.com/hub/fdi-regulation-hub/fifth-edition/article/taiwan-stringent-approach-foreign-investments-sparks-uncertainty-multinationals.

16 Id.

17 William A. Reinsch et al., Securing Semiconductor Supply Chains: An Affirmative Agenda for International Cooperation, (2022) JSTOR, http://www.jstor.org/stable/resrep42770.

18 PATENT ACT (1949-2022), Ministry of Economic Affairs (Taiwan), https://www1.tipo.gov.tw/en/lp-293-2.html.

19 Id.

20 TRADE SECRETS ACT (1986-2020), Ministry of Economic Affairs (Taiwan), https://law.moj.gov.tw/ENG/LawClass/LawAll.aspx?pcode=J0080028.

21 Id.; Amendment of Taiwan's Trade Secret Protection Act, LEE AND LI ATTORNEYS-AT-LAW (Feb. 5, 2013), https://www.leeandli.com/EN/NewslettersDetail/153.htm.

22 PATENT ACT, supra note 18; TRADE SECRETS ACT, supra note 20.

23 Taiwan retains top-20 ranking in global IP environment survey, TAIWAN TODAY (Feb. 13, 2019), https://nspp.mofa.gov.tw/nsppe/print.php?post=149873&unit=400#:~:text=Taiwan%20retains%20top%2D20%20ranking%20in %20global%20IP%20environment%20survey%20%2D%20New%20Southbound%20Policy%20Portal.

24 Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei) and the WTO, WORLD TRADE ORGANIZATION, https://www.wto.org/english/thewto_e/countries_e/chinese_taipei_e.htm (last visited Nov. 1, 2025); Amendment of the TRIPS Agreement, WORLD TRADE ORGANIZATION, https://www.wto.org/english/tratop_e/trips_e/amendment_e.htm (last visited Nov. 1, 2025).

 25 World Trade Organization (WTO), INTERNATIONAL TRADE ADMINISTRATION (Aug. 30, 2024), https://www.trade.gov.tw/english/Pages/Detail.aspx?nodeID=660&pid=743758.

26 Inside TSMC, the $1 Trillion Ghost Foundry Behind Nvidia’s Crown, IMD (Sept. 23, 2025), https://www.imd.org/future-readiness-indicator/home/the-1-trillion-ghost-foundry-behind-nvidia-crown/#:~:text=By%20serving%20hundreds%20of%20customers,full%20capacity%20all%20the%20time.

27 Wen-Yee Lee, Taiwan investigates 16 Chinese firms for poaching high-tech talent, REUTERS (Aug. 7, 2025), https://www.reuters.com/world/asia-pacific/taiwan-investigates-16-chinese-firms-poaching-high-tech-talent-2025-08-07/.  28 Taiwan prosecutors charge three with stealing TSMC trade secrets, THE STRAITS TIMES (Aug. 28, 2025), https://www.straitstimes.com/asia/east-asia/taiwan-prosecutors-charge-three-with-stealing-tsmc-trade-secrets.

29 Investment Climate Statement for Taiwan, U.S. DEPARTMENT OF STATE (Sept. 2025), https://www.state.gov/wp-content/uploads/2025/09/638719_2025-Taiwan-Investment-Climate-Statement.pdf.

30 Stephen Ezell, The Evolution of Taiwan’s Trade Linkages with the U.S. and Global Economies, ITIF (Oct. 2021), https://www.wita.org/wp-content/uploads/2021/10/2021-taiwan-trade.pdf.

31 Export Controls Laws (SHTC), INTERNATIONAL TRADE ADMINISTRATION (Mar. 4, 2025), https://www.trade.gov.tw/english/Pages/List.aspx?nodeID=298

32 Dylan Butts, Taiwan blacklists China’s Huawei and SMIC, further aligning with U.S. trade policy, CNBC (Jun. 16, 2025), https://www.cnbc.com/2025/06/16/taiwan-blacklists-china-huawei-smic-further-aligning-with-us-trade-policy-.html.

33 Ching-Fu Lin & Han-Wei Liu, Silicon Statecraft Alignment: Taiwan’s Strategic Bet on US-Led Export Controls, THE DIPLOMAT (Jul. 1, 2025), https://thediplomat.com/2025/07/silicon-statecraft-alignment-taiwans-strategic-bet-on-us-led-export-controls/.

34 Pei-Yu Wei, Taiwan’s Weaponization of Semiconductor Exports, THE DIPLOMAT (Oct. 7, 2025), https://thediplomat.com/2025/10/taiwans-weaponization-of-semiconductor-exports/.

35 Melissa Hanham et al., Taiwan’s Export Control System: Overview and Recommendations, CNS OCCASIONAL PAPER #32, MIDDLEBURY INSTITUTE OF INTERNATIONAL STUDIES AT MONTEREY 5 (Aug. 2017).

36 Brian Hsiang-Yang Hsieh & Henry Jin-Han Hsieh, Amended National Security Act imposes stricter punishments on trade secret misappropriation following new list of crucial tech, IAM (Jan. 17, 2024), https://www.iam-media.com/article/amended-national-security-act-imposes-stricter-punishments-trade-secret-misappropriation-following-new-list-of-crucial-tech.

37 Krakias Kai, Silicon Shield, TAIWAN TODAY (Aug. 4, 2025), https://taiwantoday.tw/Politics/Taiwan-Review/273227/Silicon-Shield.

38 Id.

39 Davide Campagnola, Chips made Taiwan indispensable. AI can make it unstoppable, THE LOWY INSTITUTE (Aug. 22, 2025), https://www.lowyinstitute.org/the-interpreter/chips-made-taiwan-indispensable-ai-can-make-it-unstoppable.

40 Rani, supra note 13.

41 Lery Hiciano, How Taiwan’s Chip Industry Navigates US Industrial Policy and Export Controls, GLOBAL TAIWAN INSTITUTE (Mar. 5, 2025), https://globaltaiwan.org/2025/03/how-taiwans-chip-industry-navigates-us-industrial-policy-and-export-controls/.