The U.S.-China technology war is quietly changing battlefields. In the past few years, Washington has been most concerned about which technologies cannot flow to China; now another question has surfaced; which Chinese technologies, once they enter the United States on a large scale, will in turn form strategic dependence on supply chains, materials and infrastructure? The U.S. House of Representatives Special Committee on U.S.-China Strategic Competition held a hearing on September 16 under the theme of "Import Controls." Craig Singleton, senior director of China affairs at the Foundation for Defense of Democracies, proposed the concept of an "import-side technology security system" in his testimony. This is no longer a simple increase in tariffs, but an extension of the economic security perspective from preventing the outflow of key capabilities to import controls to deal with China's industrial policies and supply chain threats.
The United States bans the use of Chinese software in vehicles' cloud connection systems to prevent in-vehicle cameras, microphones and Global Positioning System (GPS) positioning functions from being exploited by foreign adversaries. The U.S. auto industry has stepped up inspections and removal of these technologies to "decouple" from the Chinese supply chain. If Taiwan still interprets the U.S.-China technology war as meaning that advanced chips cannot be sold to China, it may have missed this strategic turn. Singleton reminded Washington that while it is restricting the outflow of key technologies, it must also prevent Chinese technology from penetrating into American factories, power grids and communication systems, causing dependence that is difficult to get rid of. Export and import controls going hand in hand will expose supply chains to deeper scrutiny. The United States has established restrictions on specific Chinese software and hardware for connected cars in 2025; Singleton advocates integrating decentralized measures into a permanent system. This proposal is not yet a full implementation of the new law, but Taiwan cannot wait for the rules to be finalized before starting preparations.
China's competitiveness in these industries comes from its mass production scale, dense supplier network, and price offensive supported by subsidies. When a large number of customers use the same set of equipment, maintenance, data and software updates are also bound together, and changing suppliers may affect the entire production line. Singleton calls it a "technological beachhead." If suppliers from other countries withdraw from long-term price competition, customers will also lose their right to choose; tariffs will then be imposed and they will not be able to immediately buy back lost production capacity. The risk for networked equipment lies in continuous access to data and remote control; mature process chips may also cause supply interruption pressure due to insufficient replacement capacity. The 2024 report of the U.S. Department of Commerce pointed out that 44% of the companies surveyed were unable to confirm whether their products contained chips manufactured by local Chinese wafer foundries. If you can’t even tell the source, how can you quickly replace it in a crisis? The cost saved by purchasing at a low price may become the cost of replacing the entire system in the future.
Taiwan cannot simplify this turn of events into a one-way profit. If the United States examines risks along the supply chain, the review may go all the way into the source of chips, communication modules, firmware updates and data flows. Even if Taiwanese companies move final assembly to Southeast Asia or Mexico, as long as key software and hardware are still controlled by Chinese suppliers, they may not meet future requirements. The certificate of origin cannot explain who is responsible for updating the program after the equipment is sold, and who has access to production data.
The division of labor of "Taiwan orders, overseas assembly" will face new challenges in proving actual control. If we only accept orders but have no ability to identify sub-tier suppliers, end customers may pass on audit responsibilities and material replacement costs together. Whether a company can provide evidence of a trustworthy supply chain may directly determine whether an order can be closed.
The government should incorporate mature processes, power management, industrial computer and robot components into the economic security layout, assist the industry in establishing component traceability, software update authority verification and substitute material verification, and strive to negotiate mutual recognition of certification and a reasonable transition period with the United States, Japan and Europe. Share verification services to reduce burden on businesses. Domestic critical infrastructure procurement should include information security, maintenance and supply outage costs to support the second source of supply with long-term procurement, giving manufacturers incentives to retain production capacity. Controls must be graded based on usage and control capabilities to avoid indiscriminate exclusion and pushing costs back to Taiwanese companies. Taiwan must not only maintain its advantages in advanced manufacturing processes, but also make the entire industrial supply chain a trustworthy option. When market access begins to determine industrial division of labor, we must participate in the formation of rules as early as possible; otherwise, even if we get new orders, we will just pay the bills for the rules set by others.
Taiwan must understand the new twist in US "import controls". When economic security shifts from controlling exports to controlling imports, it is not just products that will be repriced, but trust; it is not just production capacity that forms strategic assets, but the ability to formulate supply chain rules.
