New Taipei:Ten individuals have been indicted by the New Taipei District Prosecutors Office in Taiwan for allegedly reselling restricted military-grade chips from two American companies to Hong Kong, with the intention of them reaching China.

According to Focus Taiwan, the accused include Chen Chien-hsiung, who operates several technology firms in Taiwan, along with his brother and other associates. They face charges including fraud, forgery, and money laundering. Prosecutors are seeking a 10-year prison sentence for Chen and sentences between one and eight years for the other defendants.

The indictment reveals that Chen, formerly a salesperson for a chip distributor, exploited his knowledge of the government-funded National Chung-Shan Institute of Science and Technology (NCSIST), an authorized end user of products from U.S. companies Analog Devices Inc. (ADI) and Texas Instruments Inc. (TI). Beginning in 2017, Chen and his co-conspirators allegedly falsified documents to misrepresent NCSIST as the end user, enabling them to acquire restricted high-speed chips suitable for military applications.

These chips were imported into Taiwan and subsequently resold to Hong Kong buyers, including companies controlled by China, capitalizing on the price differential. The illegal operation reportedly generated over NT$300 million (US$9.43 million) in profits.

To evade detection, the defendants allegedly misrepresented the origin of the chips, relabeling them as "Made in Taiwan" despite their original manufacture in the Philippines, South Korea, and Singapore. This strategy helped them avoid scrutiny from customs and the International Trade Administration.

The prosecution highlighted that the defendants exported the chips despite knowing that their sale to China, Hong Kong, and Macau was restricted by the U.S. Department of Commerce. These chips were ultimately used by China's military industry, posing significant risks to Taiwan's national security and potentially damaging Taiwan's international relations by misleading the U.S. into thinking Taiwan was complicit in supplying China with the chips.

Both the U.S. and Taiwan stringently regulate the distribution and usage of strategic high-tech products, requiring end-user statements or Know Your Customer's Customer (KYCC) documentation before sales.