Taiwanese intelligence agencies have launched investigations into hundreds of Chinese companies suspected of illegally poaching engineers and other professionals in the semiconductor manufacturing industry. This was reported to Reuters by a high-ranking officer of the Taiwan Bureau of Investigation, a counterintelligence agency.

Since the beginning of last year, the agency’s interlocutor said, 7 persons were charged with illegal recruitment of personnel, another 27 persons were either interrogated or subjected to a search.

Taiwan is home to TSMC, which owns 92% of the world’s most advanced semiconductor manufacturing capabilities, and has an even more valuable resource claimed by China: vast expertise in chip manufacturing. Beijing has started the scramble for engineering talent for a number of reasons, most notably the global chip shortage and the trade war launched by U.S. President Donald Trump.

Because of this, in December 2020, a special group was created in Taiwan under the national Bureau of Investigation – its task is to fight Chinese headhunters. However, the Reuters interlocutor continues, all these activities, including raids and interrogations, are only the “tip of the iceberg”, and the official representative of the department confirmed this position. Just last year, the Bureau carried out the largest operation to date – a raid against 8 companies suspected of illegal personnel activities.

In itself, the hiring of Taiwanese specialists by Chinese companies is not against the law. It is contradicted by Chinese investment in parts of Taiwan’s semiconductor supply chain, including chip development, and some other activities, such as chip packaging, require additional permits, all of which make it difficult for Chinese manufacturers to operate in Taiwan. Local specialists can also freely travel to mainland China, although they do this infrequently – the quality of life is lower there.

One of the companies that came to the attention of the security services allegedly only pretends to be local and is not engaged in data analysis, as the sign says, but is actually a division of the company from Shanghai, where drawings of the latest chips are sent. In mid-March, the head of this company was summoned for questioning, but no charges were brought against him, so he was released on bail. Some “black headhunters” register companies offshore, which makes it difficult to trace their Chinese capital.

Beijing-based Starblaze Technology has been developing chips without permission at a technology center in Hsinchu, Taiwan. According to court documents, the company conducted job interviews via Zoom, while payroll and welfare payments were processed through Hong Kong. Tongfu Microelectronics, owned by Chinese government agencies, according to Taiwanese intelligence agencies, kept an illegal office, whose employees received salaries in US dollars to offshore accounts through a subsidiary in the same Hong Kong.

According to Lucy Chen, vice president of Taipei’s Isaiah Research, Chinese chip makers offer Taiwanese specialists salaries 2-3 times higher than the market average. The specialists most in demand by the Chinese are integrated circuit designers who can work remotely. Local companies are trying to resist the onslaught with long-term career guarantees and benefits. Specialists who defect to Chinese employers are subject to public condemnation – last year several high-ranking employees of TSMC left for the Chinese SMIC, and the Taiwanese press branded them as traitors.

The Taiwan authorities are trying to provide legislative protection: the maximum prison sentences for such crimes will be increased to 3 years, and the maximum fines will increase from $5,200 to $520,525. The government has proposed qualifying leaks of information about underlying chip technologies as a violation of national security law. However, there are fears that a comprehensive tightening of legislation may scare away conscientious foreign investors. And here the Taiwanese authorities will need to find a balance.