The Economist - UK (2022-05-28)

48 Asia TheEconomistMay28th 2022

expansionofchip­makinginChinaandat­

tracted many engineers and executives

fromTaiwan.Between 2014 and2019,more

than3,000semiconductorworkers—7%of

Taiwan’schipworkforce—movedtoChina,

accordingtoTaiwan’sgovernment.

TheexodushasalarmedTaiwaneseoffi­

cials.OnMay20ththelegislaturepassed

amendmentstoitsnational­securitylaws

andthosethatgovernrelationswithChi­

na.Thechangescriminaliseeconomices­

pionageandrequiregovernmentpermis­

sionforemployeesofcompaniesthatwork

on“nationalcoretechnology”andreceive

someformofgovernmentsupporttogoto

China.Theamendmentsthreatenupto 12

yearsofprisonforanyonegiving“national

coretechnologytradesecrets”toa foreign

power,butdonotdefinewhatconstitutes

coretechnologyortradesecrets.

Chip­industrytypesareunenthusiastic

abouttherules.“Thegovernmentthinks

it’stryingtodosomething,buttheydon’t

knowhowbusinessworks,”saysNicholas

Chen,an intellectual­propertylawyerin

Taipei.ThoughChinesecompanieshave

beenpoachingTaiwaneseexecutivesand

engineers, the most advanced Chinese

chipmakersremainyearsbehindTaiwan’s

best.tsmchasmaintaineditsleadbytight­

eninginternaltrade­secretprotection,not

byerectingbarrierstoChina,whichisone

ofitsbiggestmarkets.

It isalsonotclearhowbiga problemthe

braindrainreallyis.Taiwanesemanagers

haverealisedthattheygetdumpedbyChi­

nesecompaniesafter anaverageoffive

years,whenalltheirknow­howhasbeen

extracted.Thentheycannotfindjobsback

inTaiwan,wheretheyareseenas“trai­

tors”,saysLucyChenofIsaiahResearch,

whichstudiestheindustry.Chineseatti­

tudeshavechanged,too.Taiwaneseused

tobelookeduptoasmanagersandexperts,

butnowtheyfeelmorelike“mercenaries”

or“justoneoftheworkers”,saysa Taiwan­

ese­American executive who worked in

Chinaformanyyears.Moreover,China’s

covid­19 lockdowns and pressure from

AmericanandTaiwanesegovernmentsare

persuadingmanytogohome.

If Taiwanwantstokeepitsedge,saysMr

Chen,thegovernmentshouldnotrelyon

vaguelaws.Instead,itshouldhelpother

semiconductor companiesimprovetheir

own policies to protect trade secrets,

whichcanbecostlytoimplement.Thatisa

viewechoedbyRichardThurston,tsmc’s

formergeneralcounsel.Hesaysitwould

allow Taiwanese firms to keep growing

while protecting them from rivals—not

justChinesefirmsbutotherforeignand

domesticones,too.tsmc’smaincompeti­

torisnotaChinesecompany, butSam­

sung,whichisSouthKorean.In 2015 tsmc

won a legal battleagainst Liang Meng­

song,anexecutivewho movedtoSouth

Koreaandleakedtradesecretsthere.n

Logical conclusion

Semiconductor manufacturing capacity*

2019, % of total

Sources:BostonConsultingGroup;

SemiconductorIndustryAssociation *Logic chips

100

80

60

40

20

0

Smallestchipcomponent,nanometres

>4 28-4 10-22 <10

US Europe Other

Taiwan China Japan South Korea

AmericaandSouthKorea

Quiet comfort

W

henpresidentjoebidenpaida vis­

it  to  South  Korea  on  May  20th,  the

first stop on a five­day tour of East Asia, he

brought a special present for his South Ko­

rean counterpart. Yoon Suk­yeol, who took

over  as  South  Korea’s  president  on  May

10th,  now  owns  a  replica  of  the  sign  that

adorned  the  desk  of  Harry  Truman,  the

president  who  sent  American  soldiers  to

fight  in  the  Korean  war  in  1950.  It  reads,

“The buck stops here.”

Beyond the congratulatory gesture, the

gift alluded to America’s responsibilities as

South  Korea’s  oldest  ally  and  defender

against  the  nuclear­armed  dictatorship  to

the north. It set the tone for Mr Biden’s vis­

it, during which he and Mr Yoon vowed to

expand their countries’ military co­opera­

tion,  strengthen  deterrence  against  North

Korea and work together on a host of other

issues  from  supply­chain  resilience  to

space exploration.

The  commitment  to  more  deterrence

was put to the test soon after Mr Biden left

Japan, the second stop on his trip. On May

25th  North  Korea  launched  three  missiles

off its east coast. South Korea’s armed forc­

es said one of them was likely to have been

an  intercontinental  ballistic  missile,

which America regards as particularly pro­

vocative. Such weapons may be capable of

hitting its own shores. On the same day the

South  Korean  intelligence  service  said  it

had evidence that the North had been try­

ing  a  nuclear  detonator  over  the  past  few

weeks,  probably  in  preparation  for  a  nuc­

lear  test.  America  and  South  Korea  re­

sponded  by  affirming  the  commitment

Messrs Yoon and Biden had made just days

before,  conducting  their  first  publicly  de­

clared joint missile launch in five years. 

The show of strength echoed the gener­

al  tone  of  Mr  Biden’s  visit.  Earlier  in  the

week  the  president  had  made  headlines

with  an  offhand  remark,  quickly  walked

back,  about  how  America  might  get  in­

volved  militarily  should  Taiwan  be  invad­

ed  (see  previous  story).  Big  items  on  the

agenda aimed to assure allies of America’s

commitment  to  countering  China’s  in­

creasing heft in the region. These included

a  meeting  with  leaders  from  the  Quad,  a

loose grouping of America, Australia, India

and Japan, and the launch of the Indo­Pa­

cific  Economic  Framework,  a  plan  to

strengthen  America’s  economic  presence

in  Asia.  In  a  joint  statement  with  Kishida

Fumio, Japan’s prime minister, in Tokyo on

May 23rd Mr Biden admonished China for

its failure to condemn Russia’s invasion of

Ukraine and for its coercive actions in the

South China Sea.

Yet when it came to South Korea’s rela­

tionship  with  China,  Mr  Biden  trod  more

carefully.  The  joint  statement  he  and  Mr

Yoon  issued  at  the  end  of  his  visit  ran  to

nearly  3,000  words  but  did  not  mention

China. That reflects South Korea’s wariness

of antagonising its largest trading partner.

Memories  are  still  fresh  of  China’s  eco­

nomic  boycott  of  South  Korea  following

the  deployment  of  an  American  missile­

defence system there in 2017. 

For  South  Korea,  diversifying  supply

chains  by  building  trade  links  with  other

Asian countries might reduce China’s abil­

ity to hold it to ransom. So might an Amer­

ican commitment to step in with econom­

ic assistance should a situation like that in

2017 repeat itself. Mr Biden is right that the

best way to counter China is to reassure al­

lies  in  the  region  of  America’s  reliability.

But in certain places, if not others, suchas­

surances may be best uttered quietly.n

S EOUL

To strengthen the alliance, deter North

Korea but don’t mention China

The rug stops here