Taiwan to change law to prevent 'economic espionage' by China

The proposed amendments will mean tougher penalties for abetting Chinese companies or leaking trade secrets.
By Hwang Chun-mei
Taiwan to change law to prevent 'economic espionage' by China A chip by Taiwan Semiconductor Manufacturing Company (TSMC) is seen at the 2020 World Semiconductor Conference in Nanjing in China's eastern Jiangsu province on Aug. 26, 2020.

The democratic island of Taiwan on Thursday laid out plans to defend its semiconductor industry from "economic espionage," boosting penalties for anyone leaking its cutting-edge technologies to China or other hostile countries.

Taiwan currently makes most of the world's most advanced semiconductor chips, which are needed to build smart gadgets and machinery from cell phones to cars to fighter jets.

Taiwan's Executive Yuan approved the draft amendments to the country's national security law on Thursday, which include actions "infringing on the business secrets of the nation's core and key technologies.2

"In order to respond to expectations from all sectors that we protect our high-tech industries and prevent the outflow of important and key technologies, it is necessary to establish a stricter and more complete national security defense using the law-enforcement system," Executive Yuan spokesman Lo Ping-cheng told reporters.

According to the Mainland Affairs Council (MAC), the amendments will also set up a vetting process for any personnel entrusted, subsidized or funded by government agencies and engaging in businesses involving the country's core and key technologies.

The second goal is to prevent Chinese capital from illegally investing in Taiwan through shell companies or representatives, and to prevent Chinese companies from engaging in illegal business in Taiwan, boosting the likelihood of criminal prosecution for anyone doing Beijing's bidding, the MAC said.

Under current regulations, Chinese companies and affiliates must apply for regulatory approval to set up operations in Taiwan, but many have been using foreign affiliates and other representatives to circumvent the rule.

Under the new amendments, which have yet to be passed in the Legislative Yuan, anyone using their name to help Chinese companies set up operations in Taiwan could be jailed for up to three years, with a NT$15 million fine.

"China's economic espionage is laying siege to the rest of the world right now," Legislative Yuan secretary-general Cheng Yun-peng told reporters.

"Taiwan's amendment to the law to include economic espionage is expected to increase international trust in Taiwan," Cheng said.

"China steals technology from other countries mainly to enhance the economic strength of its companies, and of China itself; but stealing Taiwan's technology is an attempt to weaken our national security, not just our politics and economy," Cheng said.

Growing number of cases

Lo said a designated court will be set up to process economic espionage cases, while laws will also be tightened to prevent the poaching of Taiwanese talent by Chinese companies via companies set up in a third country, Lo said.

"Infiltration in Taiwan's industries from the red supply chain is getting more and more severe in recent years," Taiwan premier Su Tseng-chang said in a statement, referring to Chinese tech suppliers.

"They poached our nation's high-tech talents and stole the nation's core and key technologies."

A statistical analysis of intellectual property infringement cases published by Taiwan's ministry of justice last year showed that the number of people investigated for theft of trade secrets rose from 153 in 2015 to 352 in 2020, yet only 450 people were prosecuted.

As of 2021, only three cases of economic espionage have resulted in a conviction.

Meanwhile, Taiwan Semiconductor Manufacturing Company (TSMC) has said it will boost funding to its chip fabrication capabilities in the face of growing competition from Intel Corp.

TSMC authorized U.S.$20.9 billion in funding for capital expenditures at a board meeting on Thursday to finance the installation and upgrade of its production capacity, as well as investment in advanced packaging, fab construction and other facilities, the United Daily News reported.

Translated and edited by Luisetta Mudie.


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