Tensions between Taiwan and China continue to escalate in the semiconductor industry as Taiwanese authorities crack down on what they describe as illegal talent recruitment operations by mainland companies. The investigation highlights the growing competition for specialized engineering talent in the global chip manufacturing sector, with China's push for technological self-sufficiency colliding with Taiwan's efforts to protect its semiconductor ecosystem.
Investigation Reveals Covert Recruitment Operations
Taiwanese authorities have launched an investigation into Semiconductor Manufacturing International Corporation (SMIC) and several other Chinese tech companies for allegedly conducting illegal operations on Taiwanese soil. According to the Investigation Bureau, SMIC established a presence in Taiwan under the guise of a Samoan-based company, apparently to circumvent cross-strait regulations. This entity was strategically positioned in Hsinchu, Taiwan's premier technology hub and home to TSMC's headquarters and advanced manufacturing facilities, suggesting a deliberate attempt to target TSMC's talent pool.
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| A stylized semiconductor chip representing the focus of Taiwan's crackdown on illegal recruitment by mainland companies in the semiconductor industry |
Scale of the Investigation
The probe extends beyond SMIC to include a total of 11 Chinese companies accused of breaching Taiwan's cross-strait regulations by illegally setting up offices without applying to the government and recruiting Taiwanese engineers. Taiwanese authorities conducted raids at 34 locations in March, interviewing approximately 90 individuals. Officials noted that they have investigated around 100 similar cases since 2020, indicating a persistent pattern of recruitment activities targeting Taiwan's semiconductor talent.
Strategic Importance of Engineering Talent
The investigation underscores the critical importance of engineering expertise in the global semiconductor industry. SMIC, which became the world's third-largest contract chipmaker last year after TSMC and Samsung Electronics, has been at the center of China's efforts to develop a self-sufficient domestic chip supply chain. However, U.S. sanctions have severely limited SMIC's access to advanced chip manufacturing equipment, particularly the extreme ultraviolet (EUV) lithography machines necessary for efficiently producing chips below the 7-nanometer node.
Technical Challenges Facing SMIC
While SMIC has reportedly achieved some capability to manufacture 7-nanometer chips, the company faces significant technical hurdles without access to advanced equipment. Industry observers note that the lack of EUV machines has resulted in low manufacturing yields—the percentage of usable chips per silicon wafer—making production less efficient and more costly. These technical limitations may explain the aggressive talent recruitment efforts, as SMIC seeks engineers with experience in advanced manufacturing processes to help overcome these challenges.
Broader Context of Technology Competition
This investigation takes place against the backdrop of intensifying technological competition between China and Western nations. A Chinese government document from last year reportedly indicated that the country's domestic chip manufacturing equipment development lags approximately 15 years behind Western capabilities. Beyond Taiwan, Chinese companies have allegedly increased recruitment efforts targeting talent from other countries, including the Netherlands, home to ASML, the world's only manufacturer of EUV lithography machines.
Taiwan's Protective Measures
Taiwan's investigation represents part of a broader effort to safeguard its semiconductor industry, which is crucial to both its economy and global strategic importance. Talents in the related industries have thus become the target of poaching by Chinese enterprises, the Investigation Bureau stated, highlighting the defensive posture Taiwan has adopted to protect its technological advantages and human capital in the face of persistent recruitment attempts from mainland China.