🧠 Food for thought

Implications, context, and why it matters.

China’s “indirect channels” use shell firms and costly recruiting

• These “indirect channels” include Chinese firms allegedly masking ownership by operating in Taiwan under foreign-funded shell firms (companies that exist mainly on paper), or by opening offices without authorization 1.
• Chip designer SG Micro was accused of hiding Chinese funding to build a base in Taiwan and illegally hire Taiwanese staff, including in Hsinchu and central Taiwan 2.
• Taiwan answered with a wide police effort. In March, more than 185 agents searched 49 sites and questioned 90 people, according to Taiwan’s Investigation Bureau (the agency that investigates major crimes and national security cases) 1.
• The push has continued for years. A special task force has handled more than 100 similar cases since late 2020, tied to suspected illegal hiring and unapproved business activity by Chinese companies 1.

Taiwan is tightening laws and export rules to slow tech leakage

• Taiwan also strengthened legal tools. A 2022 National Security Act amendment created a separate offense for trade secret theft involving National Core Critical Technologies (NCCT), which are technologies the government deems essential to national security, and it raised prison terms and fines 3.
• Taiwan plans to tighten export controls on advanced semiconductor process technologies under an “N-1” approach. This would allow overseas use only of chipmaking technology at least one generation behind Taiwan’s most advanced node, which would block TSMC from deploying its newest production node abroad and cover planned U.S. production. The rules are expected to start by the end of 2025 4.
• Taiwan is moving closer to U.S. policy by adding firms such as Huawei and Semiconductor Manufacturing International Corporation (SMIC) to its entity list, which requires Taiwanese exporters to get government licenses before shipping to listed end users 5.
• The change increases Taiwan’s role in U.S.-China tech tensions, raising the political stakes for compliance and enforcement across Taiwan’s semiconductor sector 5.