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Taiwan is investigating 11 Chinese technology companies, including one of the nation’s leading chipmakers, showing Beijing relies on its neighbours’ world-leading semiconductor expertise for allegedly poaching engineers illegally.
Shanghai-based Semiconductor Manufacturing Country International Corporation (SMIC) has established a Samoa registered entity with Taiwan’s Ministry of Justice Research Bureau (MJIB), the FBI equivalent of Taiwan’s “Taiwan Talent as a Fake Foreign Investor.”
Taiwan screens investments from China and Chinese-owned entities more closely than other foreign investments. However, Chinese companies have long been seeking to circumvent these restrictions on investing in Taiwan through legal structures established in third countries.
Prosecutors on Friday said they attacked SMIC affiliates and Ark Microelectronics, a deep Shenzhen-based Ark Microelectronics and the five suspected home affiliates. They said ARK has hired more than 50 Taiwanese engineers since 2020.
Under Taiwan’s law, it is illegal for Chinese companies to operate without government approval. Prosecutors said Smic and Ark had violated.
The recruitment efforts of Chinese companies “had a serious impact on the development of Taiwan’s semiconductor industry,” said the prosecutor’s office at Hsinchu, the cradle of Taiwan’s chip industry and home to the headquarters of Taiwan’s Semiconductor Manufacturing Co (TSMC), the world’s largest chip manufacturer.
Taiwanese engineers hired by SMIC affiliates were developing technology for devices that read and write data from memory chips, prosecutors said.
The investigation suggests that Taiwan has struggled to stop the flow of tip brains to hostile neighbors despite introducing stricter laws and launching a five-year rolling crackdown.
China has claimed Taiwan as part of its territory and threatened to force it to take it if Taipei refuses to unite indefinitely, but Taiwanese engineers have played a key role in providing expertise to China’s chip sector for decades.
In 2020, Taiwan added a section to its national security law called the “TSMC Clause.” This explicitly prohibits Taiwanese citizens from transferring “critical technologies” from foreign or foreign enemy forces or from persons acting on their behalf.
It would also be illegal for foreign companies to acquire such technology through fraud.
Mjib has carried out several waves of probes and has filed over 100 lawsuits.
Industry executives said the global semiconductor boom coupled with record levels of compensation from Taiwanese companies has significantly reduced the bundle.
“It has a clear deterrent effect,” said a senior executive at a Taiwanese chip company. “If you’re going to work for a Chinese chip maker now, you can’t come back. No one here will hire you anymore.”
However, one with knowledge of the issue said that Smic continues to hire engineers from TSMC and other Taiwanese contracted chip makers.
The person said that the current engineers were more junior than in the past, but Smick was still able to hire a mid-level engineer.
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The person said Liang Mong Song, former Director of Research and Development at TSMC, has been driving Smic’s pursuit of advanced chip manufacturing technology.
Asked about the incident announced Friday, TSMC will not confirm whether any of its employees have been poached. Those familiar with the company said the problem of losing employees, which is comparable to Chinese shipmakers, has been significantly retreated in recent years.
TSMC said employee turnover rate in 2024 was 3.5%, which is “within a healthy range” of less than 10%. “We do not identify any surprising patterns of sales referring to systematic headhunting of TSMC employees,” the statement said.
