Taiwan raids Chinese firms to prevent poaching of chip engineers and tech talent

Taiwan conducted raids on Chinese semiconductor companiesfor illegal poaching chip engineers and other tech talent even as chip war between Taiwan and China worsened. The extensive raids were conducted in Taiwan’s capital Taipei and semiconductor hub, Hsinchu. The names of Chinese companies were not disclosed. This is the second time in three months when the Taiwan authorities raided Chinese companies. In March, Taiwan, home to chipmaker giant Taiwan Semiconductor Manufacturing Company Ltd , had raided eight Chinese companies for similar reasons in March.

The development has yet again brought a focus on China’s alleged attempts to steal Taiwan’s technology and skills in chip making.

Taiwanese authorities raided as many as ten Chinese companies or their R&D centers for allegedly poaching chip engineers and other tech talents. The Taiwan’s Investigation Bureau stated that illegal poaching of Taiwan’s high-tech talent by Chinese companies has badly impacted their international competitiveness and endangered national security. The Taiwanese law prohibits Chinese investment in some parts of the semiconductor supply chain, including chip design. It requires reviews for other areas such as chip packaging.

China which has made significant progress in the areas of assembly, testing, and packaging of electronics in the semiconductor industry, but lags behind in the design and manufacture of the semiconductor integrated circuits (“chips”) which require great technological sophistication to produce. Available reports show that China’s manufacturing companies have aggressively recruited in recent years to lure talent away from Taiwan. Salaries at the recruiting companies in China have reportedly been offered 2-2.5 times the average salaries and bonuses in Taiwan. Chinese officials are poaching for talent in Hsinchu in Taiwan. This has also become the centre of intellectual property theft, which often follows talent recruitment. More than 100 experienced engineers and managers from TSMC have been transferred to foundries in China in 2019 and 2020. Overall, more than 3,000 engineers are estimated to have transferred from Taiwan to mainland companies, nearly 10 percent of Taiwan’s semiconductor research and development workforce.

Realising the implications of Chinese poaching of talent ,the Taiwanese authorities have been closely watching Chinese companies indulging in poaching chip engineers and technologically talented Taiwanese.

The latest crackdown on Chinese firms was done to protect its chip supremacy. The island’s role has been globally recognised in producing the crucial components, which are used in everything from smartphones to medical devices and cars.

With the onset of the pandemic, the demand for semiconductor manufacturing grew as the technology kept education and the professional world running economies including the US and Germany asked for Taiwan’s help in stepping up production. The war in Ukraine has also increased the value of semiconductors in the global economy so the contribution of Taiwan has increased manifold in manufacturing chips.Also, Taiwan has joined the US and its allies in imposing economic penalties on Moscow by playing the highest card in its deck – cutting off semiconductor exports.

Taiwan has some of world’s leading chip manufacturing companies. Taiwan Semiconductor Manufacturing Company (TSMC) is one of them. The TSMC alone accounts for more than half of global revenue generated by semiconductor foundries. The company has a adopted a successful business model that focuses exclusively on manufacturing chips designed by other companies.

According to technical experts, semiconductor manufacturing industry is the key factor in Taiwan’s rising stature that helps distinguish the island from China. Such recognition is crucial for Taiwan, which has full diplomatic ties with only 14 states. Many countries have still been hesitant to deal with Taipei because of fear of annoying Beijing which has repeatedly stated that the island must be reunited with the mainland, by force if necessary.

Meanwhile, Taipei’s investigation bureau has joined hands with prosecutors’ offices to look for firms that were allegedly involved in suspected talent poaching. The bureau’s move came after a probe into the matter in March.  The Ministry of Justice Investigation Bureau had then stated that 10 Chinese firms were raided and more than 70 were questioned as part of a crackdown on suspected poaching of talent from Taiwanese semiconductor and high-tech sectors. The bureau conducted in coordination with prosecutors in Hsinchu, New Taipei City, Taipei and Taoyuan. Among the raided firms house were local unit of GigaDevice Semiconductor (HK) Ltd  on suspicion of illegal recruitment.Chinese-backed firms, including XEPIC Corp were raided. XEPIC’s parent company is based in Nanjing, China, and specialises in electronic design automation software making.