China’s covert attempts to acquire Taiwan’s semiconductor technology

Taiwan has launched a massive crackdown against the Chinese companies that were violating its regulations by hiring local engineers and top tech employees.

Multiple raids were launched recently on Chinese companies and chip component suppliers under suspicion of poaching Taiwanese workers.

Investigation Bureau of Taiwan in the administration of the Ministry of Justice rounded up 60 Chinese nationals on the allegation of stealing trade secrets and poaching tech employees from Taiwan. The list of companies investigated includes Vimicro, GLC Semiconductor, Analogix Semiconductor, Beijing Yinxing Technology among others.

Semiconductors or ‘chips’ are the essential building blocks in technological innovation and economic development. These chips are ubiquitous in all electrical devices including smartphones, electronic vehicles, hypersonic armaments, airships, pacemakers etc.

Demand for semiconductors is always shooting up with emerging new technologies like quantum computing, wireless communications (5G), internet of things (IoT), Artificial Intelligence (AI), all requiring highly advanced semiconductor devices.

The US has been a pioneer in the semiconductor industry for decades, housing 8 of the 15 world’s biggest semiconductor enterprises. China is a big-time importer of semiconductors and has been relying excessively on foreign manufacturers for its supply, especially the United States.

The continuing trade disputes between China and the US has made it difficult for Beijing to fulfil the needs of its domestic semiconductor industry. The US has also been tightening semiconductor export controls with stricter licensing policies, especially towards China.

China’s weakness in the trade war is its dependence on semiconductors imports to boost the efficiency of its manufacturing sector. The Chinese government has been trying to reduce its reliance on the US and to accelerate the development of its domestic semiconductor industry through its Guidelines to Promote National Integrated Circuit Industry Development and Made in China 2025 initiative.

Taiwan is home to the world-leading semiconductor industry, second only after the US. Taiwan Semiconductor Manufacturing Corporation (TSMC) produces the most advanced chips in the world catering to both Chinese and American firms such as Qualcomm, Apple, Broadcom and Xilinx

The Taiwanese government has accused China of waging economic warfare against Taiwan’s tech sector by stealing technology and inveigling away skilled engineers.

Taiwanese Executive Minister Lo Ping Cheng charged that Beijing was enticing Taiwan’s advanced-tech personnel and engaging in theft of national critical technologies, circumventing regulations, illegally investing and operating in Taiwan causing the nation a huge loss in IT security and industry competitiveness.

In September 2021, Taiwan’s Mainland Affairs Council proposed amendments to existing laws governing relations with China regarding investments in national core technology.

Subsequently, Taiwanese authorities approved (Feb 2022) draft amendments to the National Security Act making “economic espionage” a crime. As per the draft regulations, organizations and individuals that have received government subsidies or incentives for operating national critical technologies will have to seek approval from the authorities for any visits to China and failure to do so could result in a fine between 2 million and 10 million New Taiwan dollars.

The proposed amendment also stipulates that Taiwanese organisations, which were found to be a cover for Chinese companies or which are loaning their licenses to the Chinese corporations for making illegal investments in Taiwan ,would face a fine of up to New Taiwanese $25 million. To speed up trials, a designated court for economic espionage crime would also be set up. Taiwan banned (2021) job postings and advertisements for openings for careers in China.

Taiwan’s skilled tech workforce and know-how of the chip industry has long been a target for China which is trying to push the development of its own semiconductor industry. 

In the past few years, the government of Taiwan has reported many charges concerning the theft of chip trade secrets by Chinese organisations.

While China manufactures the majority of the world’s computers and smartphones, it imports almost all the semiconductors needed to run these gadgets.

To remove its technological dependence, China regularly engages in industrial espionage and other activities in an effort to develop its own semiconductor industry. This was also one of the main reasons why China was trying hard to get Taiwan back under its hold.

The strengthening Taiwan-America friendship has also made Taiwan a geopolitical focus resulting in China’s increased military activities in the island region.