Sat, Feb 16, 2019 - Page 8 News List

Taiwanese tech firms must avoid China trap

By Tzou Jiing-wen 鄒景雯

US President Donald Trump last week delivered his second State of the Union address. The speech unveiled a new guiding principle of the Trump administration’s ongoing trade dispute with China.

Resolving the trade deficit between the two nations is not the top priority, but rather the theft of US companies’ intellectual property rights and forced technology transfers.

Although Beijing has made several concessions in response to Washington’s concerns, if these core problems are not resolved, Trump is likely to continue to pile the pressure on China.

The US has opened a second, domestic front to coordinate with Trump’s dispute on China: identifying and arresting Chinese spies in the technology sector. Micron Technology Inc in late 2017 filed civil lawsuits against Taiwan-based United Microelectronics Corp (UMC) and China’s state-owned Fujian Jinhua Integrated Circuit Co for allegedly stealing trade secrets. Then in November last year, the US Department of Justice raised the issue to national security level, indicting the two companies on charges of stealing trade secrets and engaging in economic espionage.

Significantly, at a news conference prior to the Lunar New Year, Chinese Minister of Industry and Information Technology Miao Wei (苗圩) said that the US export restrictions placed on Fujian Jinhua were unfounded and that the company was innocent. Miao said the company does not possess its own technology, but used technology transfers to obtain DRAM technology from UMC. Miao argued that UMC should therefore be held responsible for any disputes concerning technology.

It was a stark example of China, under intense pressure from Washington, using a Taiwanese business as a scapegoat.

These developments are a reminder that while Taiwan’s technology sector has traditionally enjoyed a close relationship its US counterpart, a number of Taiwanese companies are heavily reliant on Chinese investment and its production supply chain. Caught in the middle of the US-China trade dispute, Taiwanese technology companies and key people in research and development must maintain a high level of vigilance to avoid becoming sacrificial pawns in this high-stakes game.

Reliable sources privately confirm that the US has now firmly established an “encirclement policy” to deal with Chinese industrial espionage. This means that any Taiwanese technology companies that cooperate with Chinese entities or establish new factories in China could directly or indirectly become implicated in stealing US trade secrets and run the risk of being thrown to the wolves by China.

Given this new state of affairs, Taiwanese companies and the government must take action.

The Ministry of Economic Affairs, the Ministry of Science and Technology, the Ministry of Education and the National Development Council should form an inter-departmental working group to formulate a strategy to protect Taiwanese businesses and workers.

If Taiwanese firms are exploring research and development cooperation with Chinese companies, they should be required to perform a risk assessment to assess the level of risk before pursuing the matter further.

Washington’s logic is very simple. It is in the process of giving Beijing a final ultimatum. If Taiwanese businesses or individuals decide to throw their lot in with China, the US will view them as collaborators with the enemy and attack them with equal vigor. No Taiwanese tech companies would be able to survive such an onslaught. The US’ China strategy is now crystal clear, and Taiwanese businesses should take note and tread carefully.

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