(Bloomberg) -- Taiwan pledged to work closely with the US and other allies to prevent China’s military from acquiring state-of-the-art technology, as Washington steps up efforts to contain the world’s No. 2 economy. 

Taiwan, home to the world’s largest semiconductor foundry, will keep its advanced chip development at home, while adopting measures to stop its tech from being used by the People’s Liberation Army, C.C. Chen, deputy minister of economic affairs, said on Wednesday. 

While Taiwan’s economy will not be able to decouple from its biggest trade partner, it will implement “very firm” export controls to keep advanced technologies from China’s military, Chen said. “With respect to national security, we will take measures to safeguard our trade secrets, safeguard our key technologies, safeguard our talents (so that they are) not to be poached illegally.”

Taiwan investigated Alchip Technologies Inc. for allegedly supplying advanced supercomputer chips to China’s Phytium Information Technology Co. -- which some analysts have said has links to the Chinese military -- and banned chip exports to Phytium, Chen said. “Once we find a loophole, we plug it.” 

Phytium, which is affiliated with research arms of the Chinese military, relied on Alchip for certain designs, the Washington Post reported in April 2021. The Taiwanese company also dealt with TSMC for production on behalf of Phytium, it said. The US eventually blacklisted Phytium, prompting Alchip to declare a suspension of shipments.

Regulators will also fine iPhone maker Foxconn Technology Group for failing to report an acquisition by the company’s Shanghai-listed arm of a stake in China’s top chipmaker, state-backed Tsinghua Unigroup, he said.

Chen’s comments come as the Biden administration prepares new restrictions on chip exports to China. Those will formalize export controls on technology behind advanced semiconductors, while restricting access to chips used in supercomputing and artificial intelligence. 

Read more: US Deals Heavy Blow to China Tech Ambitions With Nvidia Chip Ban

As the US seeks to limit access to cutting-edge technology while boosting its own domestic production capacity, Taiwan and fellow US allies South Korea and Japan have been forced to navigate increasingly incompatible business and security interests. 

Taiwan’s position as a leader in semiconductor production remains vulnerable. Concern is growing in the US over its reliance on chip production in Taiwan, as China ramps up military threats toward the democratic, self-ruled island that Beijing says is part of Chinese territory. With the implementation of the $50 billion Chips Act, the US plans to cut its dependence on Taiwan for semiconductors over the next decade, US Secretary of Commerce Gina Raimondo said last week. 

Taiwan Semiconductor Manufacturing Co., South Korea’s Samsung Electronics Co., and Intel Corp. are all building new fabrication plants in the US, as Washington strives to increase chip production on American soil.  

(Updates with details on Alchip from the fifth paragraph)

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