China Firms Lure West's Tech Talent With Huge Raises

"OBERKOCHEN, Germany -- Executives at Zeiss SMT, which makes indispensable components to build the world's most powerful semiconductors, got some troubling news last fall. Headhunters from Huawei Technologies, the Chinese tech firm, were trying to poach its employees.

Staff with access to sensitive Zeiss know-how received LinkedIn messages, emails and calls from Huawei representatives, offering them up to three times their salaries to join the Chinese company, according to people with knowledge of the situation.

The push triggered an investigation by German intelligence officials, who feared it could provide a backdoor for Huawei to access some of the world's most sophisticated intellectual property. The investigation remains open, people familiar with the matter said.

It was the latest sign that talent-poaching has become a crucial front in the battle between China and the West for tech supremacy.

As Western governments make it harder for China to access sensitive technologies -- a trend expected to continue under the administration of President-elect Donald Trump -- many Chinese companies are trying to get ahead by luring away top engineers in areas such as advanced semiconductors and artificial intelligence.

Chinese firms are focusing on several tech hubs, including Taiwan, parts of Europe and Silicon Valley. 

Some obscure their Chinese origins by forming local ventures that hire the employees to avoid drawing attention from local officials, authorities said.

The push is forcing officials in the U.S. and Europe, many of whom view recruiting as an ordinary business activity that shouldn't be restricted, to confront whether they need to do more to police the practice, and if so, how.

Taiwan, which has strict rules on Chinese recruitment, said in September that it launched a crackdown, accusing eight mainland-Chinese tech companies of illegally poaching talent from the island, threatening Taiwan's competitiveness.

South Korean authorities are toughening punishments for individuals who illegally transfer sensitive technologies to foreign countries. The country is grappling with several cases, including one in which an ex-Samsung Electronics executive was charged with illegally obtaining Samsung's factory blueprints to build a copycat chip plant in China.

The U.S. and Europe remain fairly open for most Chinese companies to recruit. But European intelligence officials said they have been watching with concern as China-linked actors try to lure experts from the continent's high-tech companies. U.S. intelligence agencies said in their latest threat assessment that they believed China is trying to use talent recruitment as one of the ways to become a science and technology superpower.

Western security officials are especially concerned about China's efforts to target ASML Holding, among the world's most important tech companies, and its suppliers, including Germany's Zeiss. The Dutch firm is the only one capable globally of making sophisticated machines needed to print structures smaller than 1/10,000 of the width of a human hair onto chips for advanced AI and other applications.

It took ASML decades to master such lithography machines, known as EUV scanners. Without them, China can't make chips at the cutting edge. The Dutch government prevents ASML from shipping its EUV machines, which also could have military applications, to China.

Since 2021, Huawei has hired dozens of engineers and other staff based in China who were working on lithography and optics for companies including ASML and other Western firms, data from LinkedIn and Chinese job-networking site Maimai show. A Chinese engineer who left ASML about a decade ago with knowledge of some of its software later set up a rival company in China, according to corporate registrations and ASML.

One former Taipei-based employee of ASML said he got inquiries from Chinese recruiters every month for two years after he left the company in 2020. The engineer said Huawei was particularly persistent, with repeated efforts to connect on LinkedIn. He said he never responded.

ASML said it had no indication of unusual recruitment activity toward its employees, and the rate at which employees leave is very low in the Netherlands and globally.

China's Foreign Ministry said it wasn't aware of the examples of talent poaching, adding that China's interaction with foreign talent is no different from other nations. Huawei didn't respond to requests for comment.

China has made clear that recruiting is a priority, especially for competitive technologies such as AI.

A government blueprint for AI development in 2017 called for attracting the "sharpest" talent, including "international top scientists" in areas such as machine learning, automatic driving and intelligent robots.

Luring foreign engineers can provide a valuable shortcut for Chinese companies because their experience can't easily be duplicated or stolen, said Paul Triolo, a partner at business-consulting firm DGA Group.

"Governments now care more about this," he said, though determining where to draw the line on acceptable recruitment will be "a very difficult task and difficult to enforce."

Many governments have restricted academic and business partnerships with China or introduced investment-screening programs for Chinese acquisitions. State funding for Chinese companies allows them to offer salaries beyond what Western companies can pay.

Many engineers are reluctant to entertain such offers, citing reputational risks and concerns about fitting into Chinese corporate culture. Yet, Chinese companies make so many approaches -- a strategy one former Huawei recruiter described in an interview as "spray and pray" -- that inevitably some say yes.

Often, they bring trade secrets with them. Last year, the chief executive of California semiconductor company FemtoMetrix testified to Congress that his firm's trade secrets were stolen when three employees left to start a semiconductor company in China, bringing thousands of FemtoMetrix files with them.

Alon Raphael, FemtoMetrix's CEO, said in his testimony it was an example of China's "playbook for the theft of American intellectual property." In an interview, Raphael said his company is "barely" still in business, and he hasn't been able to raise substantial funding since the theft.

China's Foreign Ministry said reports of alleged intellectual property stealing are baseless slander.

In Taiwan, home to Taiwan Semiconductor Manufacturing, the world's largest contract chip manufacturer, officials said they started seeing an increase in Chinese talent poaching and trade-secret theft around 2015. Frustrated, they approved new rules in 2022 that bar anyone from leaking technology critical to national security and Taiwan's industrial competitiveness to foreign countries.

Offenders face up to 12 years in prison and a fine of up to the equivalent of about $3 million. Taiwan also strengthened penalties for domestic firms that act as fronts for Chinese companies to hire talent.

"The know-how is in their brains, and in some cases, a whole team could be poached by a Chinese company," said Sun Chen-yi, deputy director general of the investigation bureau at Taiwan's Ministry of Justice. Between 2020 and July 2024, the ministry investigated about 90 cases of talent poaching, most related to semiconductors, electronics and machinery, Sun said.

Several years ago, Liang Mong Song, a former senior Taiwanese engineer at TSMC and Samsung, joined China's largest contract chip maker, Semiconductor Manufacturing International. Liang is often credited with the rapid ascendance of Shanghai-based SMIC, which last year helped Huawei produce its most advanced smartphone processor.

In Taiwan's latest crackdown, authorities said they raided 30 locations and questioned 65 individuals across four cities. Among the eight companies accused of illegally poaching talent was a large Chinese chip toolmaker.

Some Chinese chip firms try to obscure their origins, working with headhunters based in Singapore and Hong Kong. They also pair up with Taiwanese to open companies on the island to hire local engineers, investigators said.

German authorities also are concerned about China's efforts to lure engineers from its ASML suppliers.

Zeiss SMT's specialized mirrors form the centerpiece of ASML's elaborate EUV systems, which are sometimes the size of a bus. Zeiss's technologies are considered so advanced that its headquarters are off-limits to most visitors.

When Zeiss employees flagged Huawei's poaching attempts last fall, they shared recruiters' profiles with their managers, according to people with knowledge of the situation. Although no employees jumped ship, the head lobbyist for Zeiss's parent company raised the matter with government officials, triggering the German-intelligence investigation, people familiar with the matter said.

Zeiss and Germany's domestic intelligence agency, the Federal Office for the Protection of the Constitution declined to comment." [1]

1. China Firms Lure West's Tech Talent With Huge Raises. Bertrand, Benoit; Lin, Liza; Somerville, Heather; Kim Mackrael.  Wall Street Journal, Eastern edition; New York, N.Y.. 27 Nov 2024: A.1.