In a recent article published by the Global Taiwan Institute, David Yi, an overseas fellow at the Economic Security Research Program of DSET, calls for a strategic overhaul of Taiwan’s investment security framework in light of growing geopolitical risks and Taiwan’s pivotal role in global semiconductor supply chains.
Titled “Rethinking Taiwan’s Investment Security Strategy,” Yi’s commentary argues that as national security increasingly becomes a core driver of investment policy globally, Taiwan must modernize its review mechanisms to adopt a more security-oriented and strategic approach. Doing so, he writes, would strengthen national resilience, safeguard critical technologies, and promote a multilateral investment security framework grounded in democratic values.
Yi notes that the recent amendment to Article 22 of Taiwan’s Statute for Industrial Innovation, passed in April 2025, marks a step forward. The legislation responds to domestic debate over TSMC’s $100 billion investment in the United States, while aligning Taiwan with a growing trend among democratic countries—including Japan, South Korea, Italy, the U.S., the U.K., and the EU—to prioritize national security in investment screening. These reforms especially target the prevention of technology and capital leakage to authoritarian regimes.
Legacy Systems Facing New-Era Threats
Taiwan’s inbound and outbound investment review policies date back over three decades and were primarily designed to manage capital outflows to China in the 1990s. These rules were largely based on industrial competitiveness rather than national security. Yi argues that such an approach is no longer sufficient in an era of dual-use technologies and mounting geopolitical tensions.
He emphasizes that as a democratic tech power located on the frontline of authoritarian expansion, Taiwan must shift its evaluation framework to reflect the national security risks posed by emerging technologies with military potential. In doing so, Taiwan should benchmark its system against global best practices that balance industrial development with democratic resilience.
Towards a New Multilateral Investment Security Framework
Yi highlights that a new international consensus is emerging. The 2023 G7 statement, for instance, acknowledged the need to regulate outbound investment in sensitive technologies to prevent their misuse in undermining global peace and security. These include artificial intelligence, quantum information science (QIS), semiconductors, and systems related to military, intelligence, surveillance, and cyber capabilities.
In 2024, the European Commission proposed new outbound investment measures as part of its economic security strategy, while the U.S.-EU Trade and Technology Council (TTC) reiterated its commitment to jointly mitigate technology transfer risks. In February 2025, the Trump administration issued a National Security Presidential Memorandum outlining a continuation of outbound investment controls initiated under the Biden administration, aimed at preventing U.S. capital from supporting surveillance and military buildup in adversarial states such as China.
Taiwan’s Strategic Turn in Investment Policy
Yi stresses the urgency for Taiwan to adopt updated legal tools, noting that its current system heavily relies on post-investment penalties and lacks pre-emptive authorities such as mandatory divestment powers or the ability to block high-risk transactions. While the recent legislative amendments mark a significant first step, implementation mechanisms remain unclear.
Importantly, the reform did not address investment into China, which remains regulated under Taiwan’s Act Governing Relations between the People of the Taiwan Area and the Mainland Area. Yi argues that a comprehensive response to modern security challenges will require aligning this legislation with broader investment security objectives.
Given that Taiwan accounts for over 90% of global production of cutting-edge semiconductors, Yi underscores the need to prioritize regulatory capacity in this sector. He points to the U.S. Committee on Foreign Investment in the United States (CFIUS) as a potential model for Taiwan in strengthening proactive enforcement and screening capabilities.
Yi concludes that as global awareness of cross-border capital risks continues to grow, Taiwan has a unique opportunity to integrate its investment security policies more deeply with like-minded democratic allies.