News about Taiwanese spying for China has surfaced recently, this time in a case of industrial espionage involving local flat-panel maker AU Optronics (AUO). As President Ma Ying-jeou (馬英九) and the Chinese Nationalist Party (KMT) promote ever-closer business and trade relations across the Taiwan Strait, the nation needs to seriously consider the threat of Beijing’s interference in and potential influence upon Taiwanese companies doing business in China, and even upon firms operating in Taiwan.
Last week, AUO reported that two former executives stole trade secrets from the company and supplied them to a Chinese rival in exchange for hefty rewards including employment. According to the Investigation Bureau, the two executives are suspected of stealing AUO’s active-matrix organic LED display technology, image-quality technology and technology related to the manufacturing of TFT-LCDs. This happened before they were recruited by China Star Optoelectronics Technology, China’s No. 2 flat-panel maker and part of leading TV producer TCL Group.
The AUO case comes as more Taiwanese companies call for a law on industrial espionage, especially by China, as growing cross-strait ties have made it easier for Chinese firms to steal trade secrets, from agricultural technology to bio-medical technology, and from semiconductor technology to flat-panel technology. It also follows a recent warning from the US House of Representatives’ intelligence committee that Chinese state-owned companies should not be allowed to operate in highly sensitive sectors for fear of corporate espionage and concerns about US national security. Other countries have voiced similar concerns, with the Canadian government’s recent decision to delay its ruling on whether to approve Chinese state-owned firm CNOOC Ltd’s US$15.1 billion bid for Canadian oil producer Nexen Inc being just one example.
Flat-panel technology is one of Taiwan’s most sensitive assets and could have a significant impact on national security and technological competitiveness if exported without government approval. For years business leaders and trade professionals have called on the government to pay closer attention to strategic issues involving China, especially the key areas of trade secrets and intellectual property. However, the government has been moving slowly and the result is the continual flow of trade secrets and key personnel to China.
The Ministry of Economic Affairs said last week the government supported the AUO investigation, adding that the government has proposed an amendment to the Trade Secrets Act (營業秘密法) to include criminal liability and increase penalties when applied overseas. However, that is still not enough to prevent China from stealing sensitive information from Taiwan. The nation needs a law, like the US’ Economic Espionage Act, to effectively ward off potential spies as Taiwan faces increasing competition from a China notorious for stealing proprietary information and technology.
Moreover, at the same time as the Ma administration plans to further relax restrictions on Chinese investment in Taiwan — following three phases of relaxation over the past four years — the government needs to strengthen mechanisms to screen incoming Chinese investment, and to draft specific laws listing sensitive sectors Chinese investors are barred from participating in. If doing this means the creation of an “unfriendly environment toward Chinese investments” — as Mainland Affairs Council Minister Wang Yu-chi (王郁琦) put it last week, then so be it. As China is still hostile toward Taiwan and many Chinese companies are actually run by the Chinese government, such an inconvenience should be a part of the government’s considerations regarding granting permission for Chinese investment in Taiwan.
Regarding the expansion of trade and investment activities across the Taiwan Strait, the AUO case should serve as a wake-up call for the government, as industrial espionage is very much a growing threat to Taiwan’s prosperity. Turning a blind eye to this issue leaves the entire Taiwanese economy at grave risk.