American and Chinese companies depend on their semiconductors, the most advanced in the world. The local government has created new anti-espionage laws to keep their trade secrets from being leaked, but experts don’t think that’s the way to go
< i class=”i-share-btn whatsapp”>
These chips are at the heart of the most powerful computing devices, from iPhones to supercomputers (REUTERS/Ann Wang/File Photo(
Last week, the president of the United States, Joe Biden, surprised the world by stating that this country would intervene militarily in the event that Beijing “tries to take Taiwan by force”, during a press conference held in Tokyo.
“Yes. We are committed to it”The US president responded to the question of whether the United States would intervene militarily in a potential Chinese invasion of the island, which Beijing considers an “inalienable” part of its territory. This is not the first time he has made a similar statement, nor is it the first time his advisers have backed down.
That is why Taiwan is lucky to have its huguo shenshan, or the “magical mountain that protects the nation”, according to an article in The Economist. What is this fortification? Its semiconductor industry valued at USD 147 billion, equivalent to 15% of GDP, and which represents almost 40% of its exports. The great pillar of the island’s economy is also a guarantor of its security.
Taiwan is an important manufacturer of chips and headquarters of Taiwan Semiconductor Manufacturing Company (TSMC ), the world’s largest contract chipmaker and Asia’s most valuable publicly traded company. And these chips are the most advanced in the world, which, as The Economist explains,, makes the island an indispensable part of the global supply chain for crucial industries such as consumer technology, automobiles, and aviation: “U.S. companies (and their military) depend on Taiwanese semiconductors, as well as China’s military hardware and companies.”
TSMCcontrols 90% of the market for the most advanced types of chips: those with components smaller than ten nanometers (see graph), or about 10,000 times thinner than a sheet of paper. They are made in gigantic, extremely clean factories that can be seven stories high and the length of four football fields.
The logo of Taiwan Semiconductor Manufacturing Co (TSMC) (REUTERS/Tyrone Siu/File Photo)
These chips they are at the heart of the most powerful computing devices, from iPhones to supercomputers. “Only two other companies, Intel and Samsung, can make semiconductors that approach this level of sophistication, but their technology is not as good as TSMC’s, nor are they innovating as fast,” according to the article.< /p>
How the complex manufacturing process works – which involves manipulating subatomic particles to create a super-precise form of ultraviolet etching light – involves many levels of trade secrets that rivals are desperate to acquire.
Such victories by a company based in Taiwan, an island China claims as its own, add to signs of a widening technology gapthat could put advances in computing, consumer devices, and military hardware at risk, both because of China’s ambitions and natural hazards in Taiwan, such as earthquakes and droughts.
Semiconductors they pose a large and growing problem for China. “The government has set a goal of producing 70% of its own chips by 2025. It set up a 139 billion yuan ($23 billion) National Semiconductor Fund in 2014, which it topped up with another $30 billion in 2019. Local governments have invested at least $25 billion more of their own funds. In 2020, when China produced 16% of the chips it used, it announced ten years of corporate tax breaks for the most advanced chipmakers. That year, the United States restricted exports of chip-making equipment to China’s leading semiconductor maker,” says The Economist.
Chips are very important for the arms industry (REUTERS/Ann Wang/File Photo)
These incentives then led to a huge expansion of chip manufacturing in China and have attracted many engineers and executives from Taiwan. This exodus alarmed Taiwanese officials.
That is why, on May 20, the legislature approved amendments to its national security laws and those governing relations with China. These changes criminalize economic espionage and require government permission for employees of companies working on “national core technology” and receiving some form of government support to go to China. The amendments threaten toup to 12 years in prison for anyone who hands over “national core technology trade secrets” to a foreign power, but fails to define what constitutes core technology or trade secrets, reveals The Economist .
“The government thinks it is trying to do something, but it doesn’t know how business works”Nicholas Chen, an intellectual property lawyer in Taipei, told the British outlet. Although Chinese companies have been poaching Taiwanese executives and engineers, the most advanced Chinese chipmakers are still years behind the best in Taiwan. Why? Because TSMC managed to maintain its lead by strengthening internal protection of trade secrets, not by erecting barriers to China.
Furthermore, as Lucy Chen of Isaiah Research explains . Taiwanese who work for Chinese companies have found that they abandon them after an average of five years, when all their knowledge has been extracted. Then they cannot find work in Taiwan, where they are seen as “traitors”. In addition, China’s extreme anti-COVID-19 measures and pressure from the US and Taiwanese governments are persuading many to go home.
Therefore, as Chen assures in an interview with The Economist, the government should not be based on imprecise laws. “Instead, it should help other semiconductor companies improve their own policies to protect trade secrets, which can be costly to implement.”