With an eye on China, Taiwan will soon have laws on chip sector espionage

With an eye on China, Taiwan will soon have laws on chip sector espionage. (Photo by Sam Yeh / AFP)

With an eye on China, Taiwan will soon have laws on chip sector espionage

  • “Economic spies” stealing or leaking tech secrets to mainland China, Hong Kong and Macau will face up to 12 years in jail and fines of up to NT$100 million (US$3.59 million).
  • The law is to especially counter active poaching of hi-tech talent by mainland firms in recent years.

For over a year, Beijing has been doing all it takes to build up China’s semiconductor industry. The goal has led to an intensified demand for Taiwanese engineers and its critical technologies. Knowing well how their chip industry know-how and experienced workers have long been a target for China, Taiwan government is planning to introduce stringent laws to protect the island’s semiconductor industry from Chinese industrial espionage.

This will be the country’s most drastic step in effort to protect their local industry. Last year, the country banned job advertisements and posting for openings for careers in China. According to a report by Nikkei, Taiwan’s administration has approved draft amendments to the National Security Act that would make it a crime to engage in “economic espionage” or the unapproved use of critical national technologies and trade secrets outside of Taiwan. 

Sentences would be set at up to 12 years and 10 years in jail, respectively. As for any individuals or organizations that have been entrusted or subsidized by the Taiwanese government to conduct operations involving critical national technologies–they will have to receive government approval for any trips to China, according to the draft regulations. 

Failure to do so would result in a fine of between NT$2 million and NT$10 million (US$71,000 and US$358,000). Nikkei, quoting an official from the Ministry of Justice, said “the draft law aims to ban critical industry technologies from falling into the hands of any foreign country or external counterforce.” 

The official also noted that Taiwan will set up special courts to facilitate any trials related to trade secret leaks and other cases of economic espionage. In the past few years, according to the Taiwanese government, there have been many indictments involving chip trade secrets being stolen by Chinese companies.

However, with the pandemic and prolonged quarantine measures in both China and Taiwan coupled with deteriorating relations between the two sides, the move of talent from Taiwan to China in the past two years have slowed, experts reckon.

Currently, existing regulations require all Chinese companies and affiliates to apply for regulatory approval to set up operations in Taiwan. Yet, officials from the Mainland Affairs Council have said that many Chinese companies have been circumventing the regulation via foreign affiliates or asking other representatives to help set up operations in Taiwan.

With the new regulations, penalties will be raised on anyone who uses their name to help Chinese companies set up operations in Taiwan, increasing from one year in prison or a NT$150,000 fine to three years in prison or an up to NT$15 million fine, the officials said.

“High-tech industry is the lifeline of Taiwan. However, the infiltration of the Chinese supply chain into Taiwan has become serious in recent years,” spokesperson for the Executive Yuan  Lo Ping-cheng, said at a news conference two weeks ago. “They are luring away high-tech talent, stealing national critical technologies, circumventing Taiwan’s regulations, operating in Taiwan without approval and unlawfully investing in Taiwan, which is causing harm to Taiwan’s information technology security as well as the industry’s competitiveness.”

Lo reckon the administration of President Tsai Ing-wen sees an urgent need to amend the law to establish a more complete national security front line and stop such “unlawful actions.” They also believe the current Trade Secrets Act is not enough to protect the island’s most advanced technology, such as Taiwan Semiconductor Manufacturing Co.’s 2-nanometer process technology. 

“We have to raise the protection level and increase the alert to the highest level. This is a necessary move to protect our national security,” Lo said. The draft laws will be sent to the Legislative Yuan for further review, before needing lawmakers’ approval to go into effect.