(Bloomberg) — An investigation into illegal talent poaching by Beijing-based Bitmain Technologies Ltd. has revived fears Chinese companies will target Taiwan’s top engineers as their country works to build a world-class chipmaking industry.Investigators descended on the offices of Bitmain’s two Taiwan units and interviewed 19 people Tuesday in a probe into whether the crypto-mining startup had violated local laws, according to Chang Jui-chuan, a spokeswoman for the New Taipei District Prosecutors Office. The Chinese firm, which develops semiconductors for mining and other purposes, is suspected of illegally recruiting hundreds of engineers from Taiwanese firms over a period of three years. Taiwan prohibits firms from China from doing business or recruiting locally without prior approval, a measure intended to limit the influence of its political rival.The accusations against Bitmain spur concerns that Chinese firms will accelerate efforts to hire away Taiwan’s best engineers in a bid to achieve semiconductor self-sufficiency. Beijing has pledged to develop its own advanced chip manufacturing in order to dominate future technologies and cut its dependence on $300 billion of annual semiconductor imports.Read more: China to Pour More Money Into Chips, AI and 5G to Catch U.S.Taiwan’s deep pool of expertise revolves around Taiwan Semiconductor Manufacturing Co., the world’s leading chip fabricator and a supplier to most American tech giants from Apple Inc. to Nvidia Corp. U.S. and European companies like Alphabet Inc.’s Google and ASML Holding NV have set up engineering hubs and research bases to tap local talent.“China’s poaching of Taiwanese engineers undermines Taiwan’s semiconductor industry,” said Carol Lin, a law professor at the Hsinchu-based National Chiao Tung University, which is now part of the newly formed National Yang Ming Chiao Tung University. “Through the maneuver, Chinese competitors can learn about Taiwan companies’ progress. If these engineers bring trade secrets with them, Chinese rivals can have a firm grasp of Taiwan companies’ past success and failure in technological developments, and this could result in unfair competition and even endanger national security.”Beijing has denied Washington’s claims that it demands technology or talent transfers or targets the intellectual property of overseas firms. Bitmain representatives didn’t respond to multiple requests for comment.Read more: The World Is Dangerously Dependent on Taiwan for SemiconductorsBitmain’s actions are suspected of breaching Taiwan’s Act Governing Relations between the People of the Taiwan Area and the Mainland Area, Chang said. An article in the act stipulates that for-profit Chinese firms cannot set up units in Taiwan and conduct business activities — including headhunting — without approval from Taiwanese authorities, she added.A separate press statement from Chang’s office, while not identifying Bitmain by name, shed light on the allegations. In order to develop artificial intelligence chips, the Chinese startup created a new entity in China with a Taiwanese engineer as chairman. This engineer then recruited colleagues from his former company in Taiwan and formed a headhunting team to set up a research and development center in Taiwan, according to the statement. Chang confirmed the company in the press release was Bitmain.The team offered potential recruits double their existing salaries and advertised openly on Taiwanese job sites, the prosecutors said. The country’s top chip designer MediaTek Inc., a major rival to Qualcomm Inc., was affected by Bitmain’s recruitment drive, Taiwan’s Apple Daily reported. A MediaTek representative declined to comment.Taiwanese executives have accused Chinese rivals of aggressive poaching for years. In 2018, Taiwanese DRAM maker Nanya Technology Corp. President Lee Pei-ing said some of his engineers were being offered three to five times their current salaries by Chinese competitors. The typical practice was to first lure away a manager who would then go on to recruit more of his former colleagues, according to Lee.Beyond talent poaching, global firms with operations in Taiwan and local officials have accused Chinese companies of technology theft. In 2019, Taiwanese prosecutors indicted five people for leaking tech belonging to German chemical maker BASF SE to Jiangyin Jianghua Microelectronics Materials Co., while Micron Technology Inc. has sued Taiwan’s United Microelectronics Corp. and its Chinese partner Fujian Jinhua Integrated Circuit Co. for stealing trade secrets. Both Chinese companies have denied wrongdoing.Read more: Engineers Found Guilty of Stealing Micron Secrets for ChinaBitmain, the world’s largest crypto-mining equipment maker, has over the years tried to expand into AI chipmaking to cushion Bitcoin’s volatility, but the strategy divided its management. The company relies on TSMC’s foundry for semiconductor production.(Updates with employment forecast chart)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
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