Chinese Companies Used Foreign Fronts to Enter Taiwan’s Chip Sector, Investigators Say

Taiwanese authorities have investigated 166 cases involving Chinese-linked companies suspected of concealing their ownership, operating illegally or recruiting technology workers over the past six years, according to previously unpublished government data.

A Sept. 2 Rest of World investigation said Taiwan’s Ministry of Justice Investigation Bureau (MJIB) also completed 67 China-related trade-secret investigations in the technology sector during the same period.

The crackdown reflects growing concern in Taipei that Chinese companies are using shell companies, foreign registrations and other intermediaries to gain access to Taiwan’s semiconductor workforce and technology.

Chinese-linked firms accused of hiding their identities

Taiwan requires Chinese companies to obtain government approval before operating on the island. The MJIB says companies have repeatedly tried to circumvent those restrictions by presenting themselves as Taiwanese or foreign-owned businesses.

In an Aug. 5 statement, the Taiwan Investigation Bureau said investigators had identified schemes involving what it described as “fake Taiwanese or foreign investment, but real Chinese capital,” as well as unauthorized offices and staffing companies used to recruit workers. The agency said it has pursued more than 100 such cases since launching a dedicated operation in late 2020.

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Rest of World reviewed public court records from 36 of the investigations and found all resulted in convictions for operating technology businesses without the approvals required under Taiwan’s cross-strait law. Thirty-three involved research and development or chip design.

One case involved Blue Ocean Smart System, which hired a Hsinchu chip engineer in 2020 and presented itself as an American company. The engineer later found that he rarely, if ever, dealt with U.S. colleagues and instead worked with a team in Nanjing, sharing code and chip designs.

“I was explicitly told that the company was backed by American investment,” the engineer told Rest of World. Taiwanese authorities raided the company in 2021, alleging it had disguised Chinese ownership through a locally registered entity. Its Taiwan operation was later shut down.

The financial incentive can be substantial. John Chen, a director at Taiwanese chip-design company MicroIP, told Rest of World that “salary offers often involve five times that in Taiwan,” with some offers reportedly reaching 10 times local pay.

OnePlus, SMIC among companies targeted

The investigations have reached some of China’s largest technology companies.

Taiwanese prosecutors issued an arrest warrant for OnePlus founder Pete Lau, accusing him of involvement in an unauthorized Taiwan operation that recruited more than 70 engineers for smartphone software research, testing and verification. Two Taiwanese nationals were also indicted.

Reuters reported in January that OnePlus and parent company Oppo did not respond to requests for comment and Lau could not be reached.

Taiwan has also investigated Semiconductor Manufacturing International Corp., China’s leading chip foundry. The MJIB alleged that an SMIC-linked operation used a company presented as Samoan to recruit Taiwanese technology workers in Hsinchu.

Reuters reported that investigators searched 34 locations and questioned 90 people during a March 2025 operation involving SMIC-linked and other companies. SMIC did not respond to Reuters’ request for comment.

Hsinchu senior prosecutor Cheng Lun Huang told Rest of World that disguising a Chinese company as a foreign entity is among the most common methods investigators encounter. Protecting intellectual property has become important not only for security but for investor confidence, he said, adding that “foreign investors are watching closely.”

Taiwan treats advanced technology as a security issue

Taiwan strengthened its National Security Act in 2022, creating economic-espionage offenses covering trade secrets involving designated “national core key technologies.” Taiwan’s Justice Ministry said the legislation was intended to protect high-tech competitiveness and prevent critical technology from reaching China or other foreign actors.

Protected technologies now include semiconductor manufacturing processes below 14 nanometers. Serious violations involving the theft or unauthorized transfer of critical technology can carry prison sentences of up to 12 years and fines of up to NT$100 million, according to Taiwanese authorities.

Beijing has rejected Taiwan’s characterization of the crackdown. China’s Taiwan Affairs Office accused Taipei in 2022 of using investigations to intimidate mainland companies and called the enforcement campaign “political manipulation.” The office said such measures would damage cross-strait business and economic ties.