Taiwan may increase penalties for illegal tech transfer

Taiwan is seeking to increase penalties for illegal technology transfers and step up enforcement of existing regulations amid an investigation into alleged illegal aid provided by United Microelectronics Corp. (UMC) to a Chinese chip maker.

The island’s executive branch has already stamped its approval on the revised laws, aimed at “ensuring the protection of (Taiwan’s) national security and public wealth,” according to the draft law, which was written by the island’s National Science Council. The revisions would allow stiffer penalties for the illegal transfer of “sensitive technologies,” including microchip patents, to foreign nations, organizations, or individuals, and authorize the government to seek new ways to catch rule-breakers.

The proposed changes are seen as a response to an ongoing investigation into UMC, the world’s second largest contract chip maker, and its relationship with China’s He Jian Technology (Suzhou), which UMC has already said it helped establish. UMC has been fined for not keeping shareholders informed of its aid to He Jian in a timely manner, and could face further sanctions.

UMC has maintained its innocence despite admitting to broadly consulting with He Jian on everything from the set up of its production lines to the kinds of chip products it should manufacture. UMC officials say they have broken no investment or technology transfer laws in their conduct with the Chinese company.

Taiwan carefully controls technology related investments to China, including semiconductor investment. Companies must first clear a lengthy application process before they may legally invest in China’s semiconductor industry. So far, only Taiwan Semiconductor Manufacturing Co. (TSMC) has won government approval for such investments.

The proposed revisions also demonstrate Taipei’s resolve to keep up with international technology transfer regulations, and growing U.S. fears that China is gaining access to technologies that could be used to upgrade its military.

“Even in the U.S. there are regulations to protect the transfer of technology to sensitive countries…If we don’t follow [such] guidelines, Taiwan might be banned from buying U.S. technology, ” said Steve Ruey-long Chen, a deputy minister in Taiwan’s economics ministry.

The government’s new technology transfer regulations, which face a tough battle in parliament, would give authorities the power to combine up to seven years’ jail time or labor with as much as NT$30 million (US$956,000) in fines. The proposal provides even greater leeway to penalize those who “willfully conspire” to collude with foreign governments or organizations to steal technology by increasing the penalties by half again, up to NT$45 million in fines and 10.5 years in jail.

The bill would also grant the government authority to establish new management systems to ensure sensitive technologies don’t end up in the hands of states like China. Taiwan and China split in 1949 amid civil war, and Beijing has long threatened to take the island by force if it moves toward independence.

Taiwan’s parliament is split among lawmakers that want to see the island build a stronger relationship with China and help it grow, versus those who seek independence, or at least the maintenance of the status quo, for Taiwan.