Taiwan’s national elections on January 13 saw the pro-independence Democratic Progressive Party (DPP) secure the presidency for the third consecutive time, with its candidate Lai Ching-te due to assume the office on May 20. However, the elections also saw the more mainland-leaning Kuomintang (KMT) become the largest party in the country’s Legislative Yuan with the party appointing Han Kuo-Yu as the legislature’s speaker on February 1. The speaker of the Yuan has the power to choose which bills can be discussed in the legislature and could allow the KMT to prioritize bills that foster closer economic and social partnership with China over more hardline policies proposed by the DPP.
Nevertheless, the emergence of a more moderate Legislative Yuan does not appear to have altered China’s attitudes towards Taiwan as the mainland persists in using grey-zone tactics to place pressure on the island.
For example, the Fujian Coast Guard announced that it would ramp up patrols and inspections around Taiwan’s Kinmen Islands on February 25 when a Chinese fishing boat capsized near the islands after it was chased away by the Taiwanese Coast Guard. China also continued placing pressure on Taiwan’s airspace through the usage of observation balloons with Taiwan’s defense ministry indicating that a record eight Chinese balloons were observed to have crossed the median line over the Taiwan Strait on February 10.
Chipmakers face restrictions from the U.S. Department of Commerce
U.S.-led semiconductor controls continue to cause disruptions for semiconductor and electronics suppliers. Several unspecified American chip equipment manufacturers reportedly received letters from the U.S. Department of Commerce ordering them to suspend exports to China’s Semiconductor Manufacturing International Corp (SMIC), the most advanced chip plant known as SMIC South..
The U.S. Department of Commerce also ruled that American chip design giant Advanced Micro Devices Inc. (AMD) will be unable to export a weakened version of its MI300 artificial intelligence (AI) chip to China unless it first obtains permission from the U.S. Bureau of Industry and Security. U.S. officials have indicated that the chip built by AMD, reportedly called the MI309, is still too powerful to be exported to China despite the company indicating that it had designed the chip to meet existing restrictions on advanced AI chips.
The U.S. is likely to continue increasing pressure on China’s semiconductor and advanced electronics sector as the U.S. Department of Defense has expanded its list of companies working with the Chinese military.
Security concerns over Chinese-made technology products have also spilt over to the logistics sector as the U.S. Coast Guard has reportedly issued security directives to domestic operators of over 200 Chinese-made shore-to-shore (STS) container gantry cranes. The confidential security directives were issued over concerns that Chinese-made STS container cranes, which account for 80% of American STS cranes, could contain spyware which could be used to disrupt port operations. The new directives on STS gantry cranes could potentially affect Chinese heavy engineering company Shanghai Zhenhua Heavy Industries Co. Ltd. (ZPMC), which has the largest share of the STS crane market worldwide.
Chinese infrastructure investments in the American automotive sector have also emerged as a source of concern for U.S. lawmakers. These concerns have recently centred around American automaker Ford Motor Company, which has partnered with Chinese battery maker Contemporary Amperex Co., Ltd. (CATL) to construct an EV battery plant near Marshall, Michigan. The partnership between Ford and CATL has drawn the attention of U.S. lawmakers who have urged an investigation into four unspecified Chinese companies that have been contracted by CATL to provide construction, design, and IT services for the upcoming plant. Lawmakers allege that the aforementioned companies are linked to the Chinese military, the North Korean government, as well as human rights abuses in Xinjiang and are reportedly pushing for their inclusion in the U.S. Department of Commerce’s Entity List.
Companies confront forced labor concerns in Xinjiang
Companies with downstream supply chain connections to China’s Xinjiang province continue to face scrutiny over the use of Uyghur forced labor in the province. For example, German chemicals giant BASF SE announced in early February that it would be divesting its ownership stake in two 1,4-butanediol and polytetrahydrofuran plants that it operates in Xinjiang as a joint venture with Chinese chemicals manufacturer Xinjiang Markor Chemical Co., Ltd. The company appears to have taken the divestment decision after an investigative report revealed that staff from Xinjiang Markor had participated state surveillance programs targeting Uyghurs.
German automotive maker Volkswagen Group has also run into increasing scrutiny over its joint-venture operations in Xinjiang after media reports revealed that the company’s Chinese partner SAIC Motor Co., Ltd. had used forced labor to build a test track for its joint venture plant in the region. Additionally, around 1,000 Volkswagen vehicles under the Bentley and Audi brands have reportedly been detained at U.S. ports over suspicions that an electronic subcomponent used in the cars was produced with forced labor.
In addition to Xinjiang, concerns over the usage of forced labor in China’s seafood manufacturing sector also continue to rise following reports of widespread use of North Korean forced labor at seafood processors in Dandong City, Liaoning. Seafood from Dandong has reportedly been supplied to at least a dozen U.S. and international seafood firms including HF Foods Group, Trident Seafoods Corporation, Pacific Seafood, High Liner Foods Inc., and Sysco Corporation.
Everstream clients are receiving more detailed insights and recommendations about this risk.
Contact us for a personalized demo showing how to get a complete view of the risks affecting your end-to-end supply chain and what you can do to mitigate them.