China’s ties with Taiwan’s chip firm under scrutiny

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Photo by Johannes Plenio on Unsplash

There has been widespread discontent in the US over the growth of China. China is moving swiftly towards being a global player in computer chips. Chip firms from Taiwan are the biggest trade partners for China. This is hence leading to a scenario of increased sanctions on China by the US. The US authorities have already displayed their distaste officially after they cut off supply to a Chinese chip-maker. The world has been cornering China as far as international semiconductor deals are concerned. This had moved China to further its trades with chip firms in Taiwan.

However, the main contributor to the Chinese chip manufacturing industry in Taiwan has also halted its joint research ventures with China. The Taiwanese chip giant United Microelectronics Corp (UMC) has pulled this following the US. This has thrown the Chinese government-backed Fujian Jinhua Integrated Circuit Co Ltd into a setback.

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Chip Trading History

The Chinese chip market has been booming, and UMC has been the primary supplier for it. Due to international politics, China has been unable to land a helpful deal regarding semiconductors. This has led to the country being deficient in integrated chips for years. It has been reported that Chinese imports of semiconductors in 2017 crossed a whopping 270 billion dollars. This was even more than the money spent by China that year on importing oil.

As a result of this acute deficiency, China has launched more than ten joint ventures with Taiwanese tech companies. Special partnership deals by the Chinese have worked on attracting Taiwanese experts with hefty salaries and benefits. However, the US is keeping a close eye on the unfolding events. Randy Abrams, an analyst at Credit Suisse in Taipei, says:

“Such companies will need to also take care to ensure no patent or IP infringement is involved as the U.S. has export control means to restrict support of critical technology.”

The most valuable trade partnerships for China in this scenario are the ones that bring foundry services and memory chip production.

Trade Tensions

This transfer of technology between China and Taiwan has the US in knots. The historical importance becomes prominent considering the ongoing Sino-US trade war. The current Republican government has been intent on banning Chinese products. The situation is only expected to escalate further from here.

Amidst tensions, the Taiwanese government has also admitted to keeping its trade with China under a strict observing eye. The authorities are seriously concerned about losing too much of their patented technology to China. The industrial development bureau at the economics ministry Taiwan said:

“When businesses go to the mainland to invest in wafer production, they must accept controls including one that requires the manufacturing technology to be a generation behind.”

Under the sanctions that the US has put especially on Fujian Jinhua, its position is unsure. The biggest takeaway from the sanctions was the conviction on both UMC and Fuijan Jinhua. These accusations claimed that the two companies had stolen trade secrets from Micron. All three parties involved need serious re-evaluation in this delicate matter.

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