US embassy cable - 05TAIPEI1343

C O N F I D E N T I A L TAIPEI 001343 
 
SIPDIS 
 
STATE PLEASE PASS AIT/W AND USTR 
STATE FOR EAP/RSP/TC, EAP/EP AND EB/IFD/OIA 
USTR FOR SCOTT KI 
USDOC FOR 4420/USFCS/OCEA/EAP/LDROKER 
USDOC FOR 3132/USFCS/OIO/EAP/ADAVENPORT 
TREASUREY FOR OASIA/LAILEE MOGHTADER 
TREASURY PLEASE PASS TO OCC/AMCMAHON 
TREASURY ALSO PASS TO FEDERAL RESERVE BOARD OF GOVERNORS, 
AND SAN FRANCISCO FRB/TERESA CURRAN 
 
E.O. 12958: DECL: 03/21/2025 
TAGS: EINV, EFIN, ECON, PINR, TW 
SUBJECT: TAIWAN POLITICS AND EXPORT CONTROL 
 
REF: TAIPEI 709 
 
Classified By: AIT DIRECTOR DOUGLAS PAAL, REASON 1.5 B/D 
 
1.  (SBU) The State NP EXBS (Export Control and Border 
Security) training on Export Control Laws and Regulations 
began on March 22 with 38 participants representing 16 
different Taiwan Executive Branch agencies, one Legislative 
Yuan (LY) Member, and one LY staffer.  After official opening 
remarks from Bureau of Foreign Trade (BOFT) Director General 
Franco Huang, the EXBS Team Leader Peter Klason and AIT, LY 
Member, Chen Yin-Ho (TSU/Taoyuan) gave unscheduled opening 
remarks in which he stressed his support for stricter export 
controls in Taiwan. 
 
2.  (C) Legislator Chen Yin-ho, a member of the LY Science 
and Technology Committee, later told AIT that the Taiwan 
Solidarity Union (TSU) is the only political party pushing 
for a detailed investigation of the technology transfer case 
involving United Microelectronic Company's (UMC, the world's 
second largest foundry producer of integrated circuit chips) 
investment in the He Jian Company of China.  Chen said that 
UMC had never registered the He Jian investment project with 
the Ministry of Economic Affairs and never reported what 
technologies were transferred by UMC to He Jian although law 
requires these.  Chen said this was a very serious violation 
from a technology protection point of view.  Chen thought He 
Jian's recent offer of 15% equity to compensate UMC for its 
technology was proof of the violation of law, but not 
sufficient to make up for the losses suffered by UMC 
shareholders and Taiwan as a whole.  Chen believed that 
aggressively pursuing cases of illegal transfers of high 
technology was in the common interest of Taiwan and the 
United States. 
 
TSMC in Contrast with UMC 
 
SIPDIS 
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3.  (C) Legislator Chen told AIT that prior to its investment 
in China, the Taiwan Semiconductor Manufacturing Corporation 
(TSMC) held meetings with the Ministry of Economic Affairs 
(MOEA) in which it provided a detailed list of technologies 
that it intended to transfer to its subsidiary in China. 
MOEA withheld approval until the list had been cleared by 
U.S. government agencies.  Chen said there will be a public 
hearing on the draft &Technology Protection Law8 on March 
29 and invited AIT ECON to attend. 
 
Politics a Factor 
---------------------- 
 
4.  (C) Huang Wen-jur, a senior consultant at one of Taiwan's 
large securities companies told AIT that politics was a 
factor behind the TSU attacks on UMC.  According to Huang, 
the UMC Chairman Robert Tsao, and He Jian Chairman Shu 
Jian-hua were both close friends and supporters of People's 
First Party (PFP) Chairman Soong Chu-yu.  Huang believed that 
the TSU was angered by the new cooperation between President 
Chen Shui-bian and angered by the anti-secession law and 
looking for a way strike back.  The UMC case presented an 
opportunity for the TSU to 1) voice solidarity with the 
United States on a Taiwan security issue, 2) make high-tech 
investors think twice about investing in China and make 
Taiwan people think about the consequences for Taiwan of such 
investment, and 3) punish the PFP and make it difficult for 
the President to reconcile with the PFP.  TSU has long tried 
to use the export control issue to advance its own political 
agenda of restricting trade and investment in China. 
PAAL