Taiwan to tighten tech safeguards against China this year

INTERNATIONAL DESK: Taiwan is set to announce this year a list of critical technologies it wants to protect from the reach of China, a top Taiwanese official told Nikkei Asia.

“Before the end of the year, the National Science and Technology Council will announce what are considered core technologies that need to be protected,” Wellington Koo, secretary-general of Taiwan’s National Security Council, told Nikkei Asia.

“The policy will define national core technologies and cover industries including semiconductors, agriculture, aerospace and ICT [information and communication technology],” Koo said. “It will deal with investments, manpower, operations and technology transfer in these areas.”

Taiwan shares concerns held by the U.S., Japan and other governments about China’s push for advanced technologies. On Wednesday, the European Commission published a list of key technologies that pose a risk to the bloc’s economic security, in a move that follows a U.S. policy restricting China’s ability to access advanced technologies.

In August, U.S. President Joe Biden signed an executive order authorizing the treasury secretary to prohibit or limit American investments in Chinese companies involved in semiconductors and microelectronics, quantum information technologies and artificial intelligence systems.

“The new policy will elevate critical technology in supply chain and semiconductors to a national security level, enabling closer scrutiny. The aim is to prevent efforts to acquire crucial tech by China, which is targeting upstream IC [integrated circuits] design in Taiwan,” Koo said.

Beijing has for decades sought to block the sale of military-related technology and weapons from other countries to Taiwan.

“Since the U.S.-China trade war, Taiwan has coordinated more with the international community and placed more emphasis on supply chain security. The same could be said for the Netherlands and Japan,” Koo continued. “But even before the trade war, we already had the Cross-Strait Act and were closely monitoring links and engagements in the tech sector.”

What separates Taiwan from other places is that the island passed the Cross-Strait Act to regulate its relations with China in 1992, he said.

The law places closer scrutiny on investments and proposed technology transfer between China and Taiwan, and empowers the Taiwanese government to review and approve or reject such proposals.

“Essentially, the Cross-Strait Act regulates investments and bans advanced technology from being transferred to China. There is also the International Trade Administration of the Ministry of Economic Affairs, which has specific mechanisms for export control,” he added.

Taipei’s ties with Beijing have come under severe strain as China escalated military aggression, economic coercion and threats against its neighbor over the last few years. Communist China has never ruled Taiwan — a key hub in the global chip supply chain — but sees it as its territory and has not ruled out a military attack.

“You can see that China slaps import bans on Taiwanese agricultural products, but never the semiconductor industry,” Koo said. “Tech curbs are similar to our cybersecurity mechanism. We come up with a regulatory framework, and then they [the Chinese] adjust their strategies to bypass our regulations, and then we update our regulations to crack down on their maneuvers.”

China is still Taiwan’s biggest trade partner for both imports and exports. Integrated circuits were China’s top import from Taiwan in the first eight months of 2023 and also in 2022, according to Taiwan’s International Trade Administration. China imported $29.43 billion worth of ICs from Taiwan in the January-August period this year. Many of these chips are shipped to China but later assembled into electronics products and re-exported worldwide.

Taiwan, the world’s 21st biggest economy, has attempted to strike a balance between national security and economic interests, as it grapples with rising U.S.-China tensions. Since Beijing started escalating its hostility in 2016, President Tsai Ing-wen’s government has sought to strengthen defense, counter Chinese-backed cognitive warfare and address national security risks in the economy.

Last year, Taiwan’s parliament amended the National Security Act to add an “economic espionage crime” to deter illicit transfers of core technology. It also strengthened rules to ask Taiwanese companies to gain approval from authorities if they want to sell their Chinese assets or factories to local entities, to avoid risks of technology leaks.

Mohammed Soliman, director of the strategic technologies and cybersecurity program at the U.S.-based Middle East Institute, said there is a growing trend in Europe, the U.S. and Asia to protect critical technologies.

“Concerns over national security, economic resilience and competition with China drive this trend,” Soliman said. “While it’s understandable that countries want to safeguard their key technological assets, it can lead to increased protectionism, fragmented global supply chains and potential conflicts over technology access and intellectual property.”

Koo is a senior minister in Tsai’s administration and a political heavyweight in the ruling Democratic Progressive Party. He declined to elaborate on which countries are working with Taiwan on tech curbs but emphasized the need to address risks.

“Having this country’s core technology exported to China isn’t the only area that we’re scrutinizing from a national security angle. We’re working to prevent our semiconductor products and technologies from being used by China for defense or military purposes,” the security chief said. (NA)