Chinese technology companies set up entities in Taiwan and disguise them so that there is no visible connection with China. In this way, they can attract top technical talent for important projects,
That is according to a research bureau of the Taiwanese Ministry of Justice, according to The Register. Last Friday, the ministry summarised a long-term investigation into attempts to lure Taiwanese talent away. This violates Taiwanese laws that limit Chinese investments and recruitment. According to the research bureau, China circumvents these measures by setting up companies that do everything in their power to hide their connection to the mainland.
Data East, Compute West strategy
One of these companies is said to be Yunhe Zhiwang (Shanghai) Technology Co. The company develops high-quality network chips. According to the research bureau, these chips will be used in China’s Data East, Compute West strategy from 2022. This plan entails moving five million server racks from large cities in eastern China to new data centers in the west, where renewable energy sources are available. The data centers in the east are intended for applications that require low latency. Meanwhile, intensive computing tasks will take place in the west.
Intel and Microsoft employees were allegedly persuaded to work for Yunhe Zhiwang. The company concealed its true ownership by operating through a Singaporean company.
SMIC also suspected
The research agency also claims that China’s largest chip manufacturer, Semiconductor Manufacturing International Corporation (SMIC), has established a presence in Taiwan through a Samoan company and has recruited local talent. This is worrying. SMIC is on the American entity list, which is a list of companies that America considers a national security risk. The US usually reacts sharply when allies and partners work with companies on this list.
A third Chinese company, Shenzhen Tongrui Microelectronics Technology, concealed its identity so well that the Taiwanese Ministry of Industry and Information Technology even praised it as an important innovator and growth company.
As a result of the bureau’s investigation, public prosecutors in seven Taiwanese cities are now investigating 11 Chinese companies suspected of concealing their ties to Beijing.
Possible dangers for Taiwanese defense
The case is important to Taiwan because the digital technology industries – particularly chip production and semiconductor design – contribute greatly to the economy. If local talent is used to improve China’s capabilities, Taiwanese industry could be overshadowed. Even worse, technology developed in Taiwan could be used to help China realize its plan to reunify the island with the ‘motherland’ – a goal that Chinese leader Xi Jinping takes for granted, but which most Taiwanese reject.