China poses a dire threat to Taiwan’s semiconductor industry as it steps up efforts to poach Taiwan’s top chip talent, following the US’ implementation of stringent chip restrictions. Beijing is keen to develop its own semiconductor technologies, leveraging skilled engineers from Taiwan, Europe and other countries to circumvent US restrictions on providing China access to advanced US chips, particularly those used in artificial intelligence applications, as well as other chip technologies and manufacturing equipment.
Taiwan has always contended with talent competition from China, but the situation is worsening. The Hsinchu District Prosecutors’ Office on Friday said that China’s ARK Semi and ShenZhen TIGO Semiconductor have illegally poached Taiwanese chip engineers involved in research and development (R&D) to set up their own R&D centers. ARK Semi has poached 50 R&D engineers since 2020, the office said. TIGO specializes in providing data storage solutions. The companies’ talent poaching efforts are jeopardizing the development of Taiwanese semiconductor companies, the office said.
In a separate statement on Friday, the Ministry of Justice Investigation Bureau (MJIB) said it is investigating illegal talent poaching by 11 Chinese companies, including China’s biggest chipmaker, Semiconductor Manufacturing International, and cloud-based networking chip designer Cloudnix. The bureau said the companies represented themselves as being based in Singapore or third foreign countries to get around restrictions.
The situation is particularly dire for Taiwan as local memorychip makers and flat-panel manufacturers have lost competitiveness to their Chinese rivals, which have been utilizing old tricks to advance technologies and expand capacity with China state funds and the aid of Taiwanese talent.
Taiwan now only plays a marginal role in the world’s DRAM and LCD industries. Taiwan’s two largest LCD panel makers, AUO and Innolux, are diversifying their businesses to other segments such as chip packaging and reducing revenue reliance on LCD. They no longer consider themselves LCD companies.
Meanwhile, Nanya Technology, the nation’s largest DRAM chipmaker, is one of the victims of China’s large-scale talent poaching. The memorychip maker has lost numerous senior managers and skilled engineers over the more than 10 years since the rise of China’s top memorychip maker, Yangtze Memory Technologies. In just about a decade, Yangtze has significantly outpaced Nanya in terms of technology and capacity and plays a key role in the world’s memorychip industry, swaying the industry’s supply-demand dynamics.
In 2002, semiconductors, memorychip manufacturing and LCDs were seen as the major rising stars of Taiwan’s industry under the “two trillion, twin-star” project. In about two decades, memorychip makers and LCD manufacturers were knocked off the pedestal, while semiconductor contract chipmaker Taiwan Semiconductor Manufacturing Co and chip designer MediaTek continue to outshine world rivals and support Taiwan’s economy.
Although the government in 2022 reclassified Chinese firms and implemented stricter business espionage rules, the changes did not deter desperate Chinese companies from stealing top talent and trade secrets. They are only getting more aggressive as the offenders only face up to three years in prison or NT$25 million (US$753,103) in fines. Since 2020, the MJIB has launched more than 100 investigations into talent poaching, it said.
Taiwan is facing a severe talent shortage. The government must implement more measures, with stricter penalties to curb talent poaching and safeguard Taiwan’s competitiveness in key sectors. On the business side, companies should bolster their talent retention campaigns and talent acquisition programs to maintain their competitiveness.
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