Around 10% of Taiwan’s semiconductor engineers have moved to China as a result of Beijing’s stepped-up efforts to attract talent in support of its Made in China 2025 initiative, according to a report by Taiwan’s Business Weekly.

Why it matters: Chinese global consumer and industrial electronics powerhouses such as Huawei are dependent on chips made in the US, Japan, and South Korea, leaving the sector vulnerable to geopolitical risks. This became clearer after the US cut off Huawei’s chip supply by adding it to a trade blacklist in May, and Beijing is pouring money toward bolstering its weak chip sector.

  • The Taiwan Semiconductor Manufacturing Corporation (TSMC) holds close to half of the the global market share of chip manufacturing, according to Taiwanese market research firm Trendforce.

Details: In the last five years, top executives and engineers from Taiwan have taken jobs in government-affiliated companies in China, including two senior research and development engineers and the co-chief operating executive of TSMC, Asian Nikkei Review reported.

  • Chinese companies offer a salary two to three times higher than their Taiwanese counterparts, Business Weekly reported. One engineer told the Nikkei Review that his company in China pays for his daughter’s tuition at a private school.
  • Business Weekly said that Taiwan is worried that the trend could cause a brain drain in Taiwan’s semiconductor sector.

Context: China’s State Council set up a fund to bolster investment in chipmaking in 2014. After its second financing round in July, it has raised RMB 338.7 billion (around $48 billion).

  • Chip manufacturing requires engineers with a specific skill set, and Taiwan has a 40-year legacy in the industry and 40,000 semiconductor engineers, resources that China lacks.
  • The trend of Taiwanese experts moving to China to work on chips is not new. China’s largest semiconductor manufacturer, Semiconductor Manufacturing International Corporation, was founded by Richard Chang in 2000 when his business in Taiwan was acquired by TSMC.
  • Ahead of Taiwan’s elections set for Jan. 11, Beijing announced 26 measures designed to draw Taiwanese enterprises to the mainland and extend certain rights to Taiwanese individuals.
  • The central government introduced Made in China 2025 in May 2015 as part of an initiative to bolster the country’s homegrown technology industries and reduce reliance on, among other things, foreign semiconductors.

SILICON | Can China make chips?

Eliza was TechNode's blockchain and fintech reporter until July 2021, when she moved to CoinDesk to cover crypto in Asia. Get in touch with her via email or Twitter.

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