Taiwan to draft laws to save semiconductor industry from Chinese espionage

In a bid to save its crown jewel semiconductor industry from Chinese industrial espionage, Taiwan is mulling to draft a law that would carry up to a 12-year prison sentence.

Lauly Li and Cheng Ting-Fang, Nikkei Asia said that Executive Yuan on Thursday approved draft amendments to the National Security Act that would make it a crime to engage in "economic espionage."

This will help in the unapproved use of critical national technologies and trade secrets outside of Taiwan. 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 (USD 71,000 and USD 358,000), reported Nikkei Asia.

"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.

"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," added Lo.

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."

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, said Lauly and Cheng.

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 postings 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, reported Nikkei Asia.

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.