After fake employees, fake enterprises are next hiring threat to corporate data

Chinese companies are trying to cut Taiwan’s lead in semiconductor technology by hiring away its best engineering talent through ‘front’ companies that hide their connections to China, the Taiwanese Ministry of Justice Investigation Bureau (MJIB) has alleged.

In a dramatic crackdown on the practice last week, MJIB said its agents raided 11 Chinese companies in 34 locations, questioning 90 individuals in connection with what it described as an “illegal poaching” campaign.

According to an MJIB statement, several Chinese companies had set up companies that looked as if they were Taiwanese, foreign-owned, or overseas Chinese, using tactics designed to hide their connections to the mainland.

The statement provided three examples, the most prominent of which was Semiconductor Manufacturing International Corporation (SMIC), China’s largest chip maker, which is partially owned by the Chinese state. The company had started recruiting staff via a front company set up in Taiwan as a subsidiary of a separate entity apparently based in the island of Samoa, the MJIB claimed.

Meanwhile, Chinese networking chip company Cloudnix, had “aggressively recruited talent from major global firms such as Intel and Microsoft since its establishment in 2020,” the MJIB said. The company had set out to hide its Chinese control by registering itself in Taiwan, and later, to avoid deeper scrutiny, as being owned by an entity based in Singapore.

A third, Shenzhen Torey Microelectronics Technology, had tried to hire Taiwanese from inside the country while keeping its presence on the island a secret.

Disguising themselves in this way allowed Chinese companies to evade sanctions against the country as part of their attempts to undermine Taiwan’s lead in semiconductors:

“Taiwan’s high-tech industry is the backbone of our economy, with semiconductor companies and related industries serving as the country’s ‘National Protective Shield.’ Consequently, Taiwan’s high-tech talent has become a key target for recruitment by Chinese enterprises,” said the MJIB.

Existential threat

Stealing its chip engineers and their knowhow is, to the Taiwanese, perhaps akin to the Soviets secretly trying to hire members of the US Apollo rocket program during the 1960’s space race. Anything that threatens its prowess in this area is viewed as an existential threat to a small island trying to remain independent,.

So far, Taiwan’s Ministry of Justice hasn’t provided any evidence that the incidents are part of a wider and more organized campaign against the country’s chip sector. It could just as easily be the way many organizations behave when they believe they are behind in an area of strategic importance: they try to hire the opposition’s talent. 

Normally, staff are targeted in more direct and malicious ways, for example by using fake recruiters to trick people into downloading malware as the North Korean hackers are believed to have done earlier this year.

Another alternative tactic is that of workers trying to get themselves hired by western companies to conduct insider attacks on behalf of North Korea. Spotting these attacks can be incredibly difficult. Often the candidates look like any other aspiring tech worker in an industry where skills shortages cause some organizations to lower their guard.

Further afield, cases have emerged of insiders allegedly hired to steal secrets directly from their employers, such as Google, on behalf of China.

Unusually, the Taiwanese warning turns this idea on its head: it’s not so much who you are hiring that is the threat, it’s who is hiring you.