China Poaches Semiconductor Technology via Employees at Taiwan’s Top Chipmakers

April 24, 2018 Updated: October 8, 2018

Taiwan prosecutors have filed charges against a former employee at the world’s largest contract chipmaker, alleging that he stole technology with the intention of providing it to a state-owned firm in mainland China.

The case brings to light China’s ambition to acquire semiconductor technology by any means necessary. The chips are essential for making most electronic devices, yet the Chinese regime relies heavily on imported foreign chips, as it has lagged behind in advancing its own domestic technology. When the U.S. government recently announced that it would ban American firms from supplying tech parts to top Chinese smartphone maker, ZTE, the company’s dependence on American chips was laid bare.

Meanwhile, the Chinese regime has aggressively directed Chinese firms to invest in or acquire foreign semiconductor firms in order to obtain the technological innovation it desires for its own national interests.

According to a report by Taiwan’s Central News Agency on April 18, Hsinchu District prosecutors discovered that an engineer at Taiwan Semiconductor Manufacturing Company (TSMC), identified only by his surname, Wu, had copied documents related to 28-nanometer technology in September 2017. He planned to leave the company in December, after which he would take the documents to his new job at China Resources, a state-owned firm, to reproduce the proprietary technology.

Epoch Times Photo
A photographer takes a shot beside a Taiwan Semiconductor Manufacturing Company (TSMC) logo, during a quarterly report meeting in Taipei on April 26, 2007. (Sam Yeh/AFP/Getty Images)“`

China Resources is a conglomerate under the direction of China’s State Council. One of its subsidiary companies, China Resources Semico Co., supplies chips to many domestic consumer electronic products.

Prosecutors are charging Wu with theft of trade secrets and breach of trust.

A similar case emerged in May 2017, when an engineer at TSMC surnamed Hsu made copies of documents related to the same technology. “The technology features high performance and low power consumption,” according to a report by Taipei Times.

Prosecutors discovered that Hsu had visited the Chinese tech firm, Shanghai Huali Microelectronics Corp., a month before he submitted his resignation letter. They allege that Hsu had used those documents as leverage to obtain a job at the Chinese firm. After TSMC staff confronted Hsu, he admitted to the theft and the staff recovered the documents.

The phenomenon of Chinese firms luring away Taiwanese tech talent is a major issue of concern for Taiwanese tech companies.

The CEO of Taiwan chipmaker Nanya Technology, Lee Pei-Ing, recently made remarks in which he said that the company’s DRAM technology—used in personal computers and servers—was being poached by China via former employees. Some 50 odd former staff were enticed with lucrative positions in China, he said, according to a report by Taiwan media United Daily News.

Back in March, a senior official at the U.S. Commerce Department, Ian Steff, visited Taiwan to meet with TSMC chairman Morris Chang and discuss ways to collaborate, according to a report by Nikkei Asian Review, a Japanese magazine.

Epoch Times Photo
Morris Chang, chairman of TSMC, listens during a shareholders conference in Taipei on Jan. 16, 2014. (Sam Yeh/AFP/Getty Images)

Steff also met with local chip industry executives and local representatives of American chipmakers “to discuss topics ranging from the protection of intellectual property, trade secrets, to information security issues,” according to the Nikkei report, citing an industry executive. Steff had informed the group that “Taiwan would be an important ally for the United States in tackling intellectual property issues with China,” according to the report.

China’s intellectual property (IP) theft was the key issue that U.S. President Donald Trump sought to tackle with recent trade tariffs enacted on Chinese imported goods.

Taiwan’s Minister of Economic Affairs, Shen Jong-chin, also told Nikkei Asian Review in a March interview that Taiwan chipmakers were particularly concerned about IP theft by their Chinese competitors, especially through forced technology transfers when doing business in China. “Many business owners are really careful about this and could be reluctant to invest too much there,” Shen told Nikkei Asian Review.

Li Jing contributed to this report.

Follow Annie on Twitter: @annieeenyc