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Taiwan is investigating 11 Chinese technology companies, including the country’s leading chipmaker, on suspicion of illegally poaching its engineers, an indication of Beijing’s reliance on its neighbour’s world-leading semiconductor expertise.
Shanghai-based Semiconductor Manufacturing International Corp (SMIC) set up a Samoa-registered entity to “poach talent in Taiwan as a fake foreign investor”, Taiwan’s Justice Ministry’s Investigation Bureau (MJIB), the country’s equivalent to the FBI, said on Friday.
Taiwan screens investment from China and Chinese-owned entities more tightly than other foreign investment. But Chinese companies have long sought to circumvent these restrictions to invest in Taiwan through legal structures set up in third countries.
Prosecutors on Friday said they raided offices of an SMIC affiliate and an affiliate of Shenzhen-based Ark Microelectronics and the homes of five suspects. Ark had hired more than 50 Taiwanese engineers since 2020, they said.
Under Taiwanese law, it is illegal for Chinese companies to operate without government approval — which prosecutors said SMIC and Ark violated.
The Chinese companies’ recruiting activities have “had a severe impact on the development of Taiwan’s semiconductor industry,” said the prosecutor’s office in Hsinchu, the cradle of Taiwan’s chip industry and home to the headquarters of Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest chipmaker.
The Taiwanese engineers hired by the SMIC affiliate were developing technology for solid-state drives, devices that read and write data from memory chips, the prosecutors said.
The investigation suggests that Taiwan is still struggling to stem the flow of chip brainpower to its hostile neighbour, despite introducing tougher laws and launching a five-year rolling crackdown.
China claims Taiwan as part of its territory and threatens to take it by force if Taipei refuses unification indefinitely, but Taiwanese engineers have for decades played a crucial role in providing expertise to China’s chip sector.
Taiwan in 2020 added a section to its national security law — nicknamed “the TSMC provision” — that explicitly bars Taiwanese citizens from transferring “critical technologies” to entities from any foreign country or foreign hostile force, or any person acting on their behalf.
It also makes it illegal for foreign entities to obtain such technologies by deceit.
MJIB has conducted several waves of probes, resulting in more than 100 legal cases.
Industry executives said the crackdown — combined with record compensation levels at Taiwanese companies thanks to the global semiconductor boom — had greatly reduced the brain drain.
“There is a clear deterrent effect,” said a senior executive at a Taiwanese chip company. “Now, if you go to work for a chipmaker in China, you cannot come back — nobody here will hire you any more.”
But one person with knowledge of the matter said SMIC had continued to hire engineers from TSMC and other Taiwanese contract chipmakers.
The person said that although the engineers joining now were more junior than in the past, SMIC was still able to hire mid-level engineers.
The person said Liang Mong Song, a former research and development director at TSMC who has been driving SMIC’s pursuit of advanced chip manufacturing technology, played a crucial role in recruiting.
Asked about the cases announced on Friday, TSMC would not confirm whether any of its employees were among those poached. A person familiar with the company said that the issue of losing employees to rival Chinese chipmakers had greatly receded in recent years.
TSMC said its employee turnover rate was 3.5 per cent in 2024, “within a healthy range” of less than 10 per cent. “We have not discerned any alarming patterns in turnover that would point to systematic headhunting of TSMC employees,” it said in a statement.
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