Taiwan is preparing to introduce tougher laws to protect the island’s crown jewel semiconductor industry from Chinese industrial espionage.
The Executive Yuan on Thursday 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.
In addition, any individuals or organizations that have been entrusted or subsidized by the Taiwanese government to conduct operations involving critical national technologies will have to receive government approval for any trips to China, according to the draft regulations. Failing to do so could incur a fine of between 2 million and 10 million New Taiwan dollars ($71,000 and $358,000).
“High-tech industry is the lifeline of Taiwan. However, the infiltration of the Chinese supply chain into Taiwan has become serious in recent years,” Lo Ping-cheng, minister without portfolio and spokesperson for the Executive Yuan, said at a news conference on Thursday. “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 said 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.”
The current Trade Secrets Act is not enough, he said, 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,” Lo said. “This is a necessary move to protect our national security.”
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 said Taiwan will set up special courts to facilitate any trials related to trade secret leaks and other cases of economic espionage.
The move comes as Beijing seeks to build up China’s semiconductor industry — a goal that has intensified demand for Taiwanese engineers and its critical technologies. Last year, Taiwan banned job advertisements and posting for openings for careers in China.
Taiwan, a self-governed democracy that Beijing views as a part of its territory, boasts the world’s second-largest chip industry by revenue. Its global importance has been highlighted by the unprecedented global semiconductor crunch that affected a wide range of industries from smartphones to automobiles.
Taiwan’s chip industry know-how and its experienced workers have long been a target for China in its push to develop its own semiconductor industry. There have been many indictments involving chip trade secrets being stolen by Chinese companies in the past few years, according to the Taiwanese government. However, the COVID pandemic and prolonged quarantine measures in China and Taiwan coupled with deteriorating relations between the two sides have slowed the move of talent from Taiwan to China in the past two years, industry executives told Nikkei Asia.
Existing regulations require all Chinese companies and affiliates to apply for regulatory approval to set up operations in Taiwan. However, many Chinese companies have been circumventing the regulation via foreign affiliates or asking other representatives to help set up operations in Taiwan, said an official from the Mainland Affairs Council.
The new regulations will raise the penalty 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.
The draft laws will be sent to the Legislative Yuan for further review, said Lo, the cabinet spokesperson. It will then need lawmakers’ approval to go into effect. (Nikkei Asia)