Thu, Nov 08, 2018 - Page 11 News List

ANALYSIS: China’s ties with Taiwan’s chip firms under scrutiny

By Jess Macy Yu and Yimou Lee  /  Reuters, TAIPEI

Washington’s decision to cut off US supplies to a Chinese chipmaker spotlights mounting tensions over China’s drive to be a global player in computer chips and the ways in which Taiwanese companies are helping it get there.

Shut out of major global semiconductor deals in the past few years, Beijing has been quietly strengthening cooperation with Taiwanese chip firms by encouraging the transfer of chipmaking expertise to China.

Chip giant United Microelectronics Corp (UMC, 聯電) last week halted research and development activities with Chinese state-backed partner Fujian Jinhua Integrated Circuit Co Ltd (晉華集成電路) following the US move.

Taiwanese firms such as UMC have helped supply China with a steady pipeline of chip expertise in exchange for access to the fast-growing chip market there.

China has faced a shortage of IC chips for years. Last year, it imported US$270 billion of semiconductors, more than its imports of crude oil.

At least 10 joint ventures or technology partnerships have been set up in the past few years between Taiwanese and Chinese firms, according to industry experts, luring Taiwanese talent with hefty salaries and generous perks.

“Such companies will need to also take care to ensure no patent or IP [intellectual property] infringement is involved, as the US has export control means to restrict support of critical technology,” Credit Suisse Group AG analyst Randy Abrams said in Taipei.

Among the most valuable cross-strait partnerships for China would be ones that strengthen its foundry services and memorychip production. Those two sectors require much-needed help from overseas firms due to the complexity of the manufacturing technologies and intense capital requirements, analysts have said.

However, the technology transfer between Taiwan and China has raised concerns amid the Sino-US trade war and escalating tensions across the Taiwan Strait.

China has aggressively used “market-distorting subsidies” and “forced technology transfers” to capture traditional and emerging technology industries, American Institute in Taiwan Director Brent Christensen told a business gathering in late September. “These actions are harming the United States’ economy, Taiwan’s economy and other economies.”

Taiwan is one of the largest exporters of IC globally and many worry the nation could lose a key economic engine to its political foe.

The government views chipmakers’ cooperation with China cautiously and has implemented policies to ensure Taiwan’s most advanced technology is not transferred.

“When businesses go to [China] to invest in wafer production, they must accept controls, including one that requires the manufacturing technology to be a generation behind,” the Ministry of Economic Affairs’ Industrial Development Bureau said in a statement.

Cooperation between UMC and Fujian Jinhua came under scrutiny last month, when the US government put the Chinese company on a list of entities that cannot buy components, software and technology goods from US firms amid allegations it stole intellectual property from US-based Micron Technology Inc.

Fujian Jinhua denied the allegations.

Fujian Jinhua now faces big challenges to reach commercial high-volume production as expected in 2020, industry observers have said.

Last week, UMC and Fujian Jinhua, which was only founded in 2016, were charged with conspiring to steal trade secrets from Micron in a US Department of Justice indictment.

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