Investing.com -- Shares of Taiwan Semiconductor Manufacturing slipped about 1% in premarket trading Tuesday after Bloomberg reported that Taiwanese authorities are weighing significantly tighter export controls on AI chip sales to China.

The measures, should they take effect, would represent one of the boldest moves by President Lai Ching-te’s government to safeguard Taiwan’s technology sector and national security.

Officials in Taipei are considering new rules that would restrict AI chip sales to all Chinese customers, not just those on existing blacklists such as Huawei Technologies, according to Bloomberg, citing people familiar with the matter.

Being discussed as part of broader trade negotiations with the United States, the measures would for the first time give Taiwan the legal tools to prosecute unauthorized AI chip exports to China as a criminal offense.

Currently, such sales are banned under U.S. regulations, but Taiwan does not treat them as a crime under its own laws, limiting the scope of cases its authorities can pursue domestically. Taiwan made its first known detentions of alleged chip smugglers only last month, on the narrower charge of document falsification.

Under the framework being considered, Taiwan would restrict sales of AI chips above a certain processing power threshold to Chinese buyers — mirroring the approach Washington has taken since 2022. Details are still being finalized, and senior officials on both sides have yet to review and sign off on any potential agreement, the report said.

The deliberations come amid growing concern in Washington over the diversion of advanced hardware, including AI servers equipped with Nvidia chips, from Taiwan to China. Last week, the Trump administration moved to close a potential loophole that may have allowed advanced chips to reach subsidiaries of Chinese companies located outside China.

On Monday, senators Jim Banks, a Republican from Indiana, and Andy Kim, a Democrat from New Jersey, wrote to Bureau of Industry and Security chief Jeffrey Kessler urging regulators to directly address the practice of Chinese firms’ overseas subsidiaries ordering custom-designed chips from contract manufacturers such as TSMC.