The PRC’s Remote Poaching Model
A Case Study for Taiwan’s Economic Security
Hello, I’m Ylli Bajraktari, CEO of the Special Competitive Studies Project. In this week’s edition of 2-2-2, Min-Yen Chiang of the Research Institute for Democracy, Society, and Emerging Technology (DSET) in Taiwan joins SCSP’s Channing Lee to unpack a case study involving PRC remote poaching of Taiwanese engineers.
SCSP is excited about our upcoming AI+Summit Series, a set of high-level events dedicated to enabling rapid advancements in artificial intelligence as it transforms our country and becomes a keystone of our national security.
The AI+Energy Summit, the first in this series, will take place on September 26, 2024, in Washington, D.C. We recently announced Robert M. Blue, Charles Meyers, and Ali Zaidi as our first set of speakers - stay tuned to see who else will join us! The next event in this series is the AI+ Robotics Summit and it will take place on October 23rd. The AI+Summit Series will culminate with our next AI+ Expo and the Ash Carter Exchange on June 2-4, 2025. We hope to see you there!
We are excited to introduce new video segments to our newsletters! Check out Channing’s overview of today’s newsletter, “The PRC’s Remote Poaching Model.”
The PRC’s Remote Poaching Model: A Case Study for Taiwan’s Economic Security
Earlier this summer, SCSP co-hosted a workshop on economic security with the Research Institute for Democracy, Society, and Emerging Technology (DSET, 科技、民主與社會研究中心), a new research organization in Taiwan committed to proposing policy recommendations on emerging technologies based on the public needs of democracy and society and to offering the international community a unique Taiwanese perspective. At the event, DSET researchers explained the evolution of Taiwan's economic security framework, exploring historical perspectives and regulatory insights, and discussed lessons learned for international allies.
As economic security becomes increasingly important to national security, Taiwan’s experience offers important insights into how the People’s Republic of China (PRC) has advanced its technological power. A new DSET report details the story of how Bitmain, a Beijing-based chip designer and the world’s leading supplier of cryptocurrency mining machines, utilized a “remote poaching” model to develop its chip and AI technology by indirectly employing Taiwanese engineers.
Below, we summarize the findings of this new report and discuss its implications for both Taiwan and the United States.
The Story of Bitmain in Taiwan
Following tightened U.S. restrictions on Huawei in 2020, a new landscape in the semiconductor industry began to take shape, with Bitmain emerging as a key player among Chinese companies placing orders with Taiwan Semiconductor Manufacturing Company (TSMC), the global leader in cutting-edge semiconductor manufacturing. Founded in 2013, Bitmain is a leading Chinese integrated circuit (IC) design enterprise and major supplier of cryptocurrency mining machines that has ambitions to challenge the AI chip market dominance of Nvidia and AMD. In recent years, Bitmain has been a source of significant demand for TSMC's 3nm chips. While Bitmain’s reliance on TSMC for advanced application-specific integrated circuit (ASIC) chips has been fundamental to its operations, the company faces regulatory uncertainties, including Chinese government restrictions on cryptocurrency development.
Co-founders Micree Zhan and Jihan Wu played pivotal roles in Bitmain’s growth, establishing a global corporate structure and securing significant investments aligned with China’s semiconductor industry strategy. In the wake of the cryptocurrency boom, Bitmain collaborated with local Chinese governments to develop AI chip technology for smart cities. However, Bitmain’s progress in AI chip specifications relied not only on TSMC’s manufacturing technology, but also on the expertise of Taiwanese engineers, which was crucial in the early development of Bitmain’s edge AI chip products.
Bitmain's development of edge AI chips progressed with the help of Beijing Jingshi, a company bolstered by the technical contributions of Taiwanese engineers and substantial financial investments from Chinese entities, including Beijing E-hualu and Xiaomi Group. The company’s shareholding structure underscores the complex web connecting Taiwanese technological expertise and Chinese capital: Bitmain leverages Taiwan's semiconductor know-how by employing Taiwanese engineers at a firm called WiseCore Tech to design their chips, then contracting with TSMC for manufacturing and ASE for packaging and testing. This process takes place all without relocating Taiwanese engineers.
The Taiwanese government has since acted to safeguard its economic security. In March 2021, Taiwanese authorities launched an investigation that disrupted Bitmain's access to Taiwanese AI chip technology, resulting in the dissolution of WiseCore Tech and significant changes in Beijing Jingshi's ownership. This legal action severed the connection between the two companies, reinforcing Taiwan's economic security framework against unauthorized Chinese investments and technology transfers.
However, from a legal standpoint, the investigation primarily focused on Bitmain's failure to comply with investment review procedures rather than on the protection of specific semiconductor technologies. This raises critical questions about which indigenous semiconductor technologies should be safeguarded and how unauthorized use by China could threaten Taiwan's national interests.
The “Remote Poaching Model”: Implications for Taiwan, the United States, and Beyond
This story illustrates how Bitmain used a “remote poaching model” to transfer Taiwanese R&D expertise and technology through PRC employment of Taiwanese engineers. It underscores the need for Taiwan to strengthen its legal framework to safeguard economic security. Identifying and regulating key chip design technologies is essential to bolstering Taiwan's ability to manage potential supply chain security risks in the context of the U.S.-PRC tech competition.
Bitmain is not an isolated case. Following the Bitmain incident, Taiwanese authorities launched a series of investigations into semiconductor company offices around Hsinchu Science Park, the epicenter of Taiwan’s semiconductor industry and AI supply chain and home to numerous key academic institutions and research centers. (TSMC draws significant support from the semiconductor ecosystem concentrated in this geographic area.)
Over the last 3 years alone, authorities disclosed dozens of similar cases. Unfortunately, the details of these cases are not fully revealed in official statements, leaving unanswered questions about the impact of these investigations on China's efforts to develop indigenous technological capabilities. It also remains unclear whether Taiwan’s actions can sufficiently safeguard its economic security and long-term national interests.
But the same remote poaching model, given its “remote” nature, could occur outside of Taiwan as well. Earlier this year, for example, it was reported that PRC national champion Huawei had secretly sponsored millions of dollars worth of microelectronics-related research projects at U.S. universities thanks to a partnership with a U.S.-based nonprofit. And, in 2021, PRC chip design firm Phytium designed TSMC-manufactured 5nm supercomputing chips that underpinned PLA advances in hypersonic glide vehicles. As for Taiwanese research and development, though the AI chip products initially developed by Bitmain's team of Taiwanese engineers may not fall under U.S. export control regulations, the technologies transferred could serve as a foundation for China’s advancement toward more sophisticated technologies. The actions of Taiwanese authorities have focused not on whether the semiconductor technologies involved are classified as sensitive, but rather on Bitmain's unauthorized business activities in Taiwan. This legal approach may leave some gaps, but it has effectively halted the continuation of this business model in Taiwan.
This situation provides valuable lessons for Washington as it implements its "small yard, high fence" strategy. The most updated U.S. export controls on advanced semiconductors aim to directly restrict the flow of technology, equipment, and know-how to the PRC: performance metrics determine the parameters for chip exports, technical thresholds define the types of equipment that fall under licensing requirements, U.S. persons are largely barred from working with PRC entities, and additional PRC chip design firms have been added to the U.S. Entity List. While these rules have tightened the screws on China’s chip ecosystem, the existence of the remote poaching model underscores that the PRC will continue to seek creative methods to circumvent U.S. restrictions, including by exploiting the design and fabrication know-how of U.S. partners and allies. This case study demonstrates why the United States must invest further resources in allied capacity building for export control enforcement and violation detection, prioritizing cooperation with partners that are also being targeted by Beijing.
It also begs another question: Beyond the "small yard" of controlled advanced technologies, what other business models that fall outside this framework should be targeted to effectively prevent China from building its own technological capabilities? Taiwan’s approach of requiring notification and prosecuting companies that fail to do so presents one approach but, as explained above, does not solve the root of the problem. Case studies like this one serve as a staunch reminder that, as U.S. policies mature, it will be worth thinking beyond traditional mechanisms of control to ensure U.S. and allied economic security.
Reading this immediately connected me to the many many ways that similar approaches could be a work in energy, especially the 25 separate technologic approaches under development in fusion.