Contract Manufacturing and Technology Transfer Risks

(The Jamestown Foundation) Top contract manufacturing firms may further the techno-industrial dominance of the People’s Republic of China (PRC). These firms have been important vectors of technology transfer and industrial upgrading for over three decades. Now pivoting to Beijing’s priority sectors, they risk cementing its dominance in key future technologies. Beijing’s industrial ecosystem pressures firms to channel dual-use technologies into supporting its military. As this ecosystem develops, both contract manufacturers and their overseas clients will find it increasingly difficult to disentangle their inputs from outputs that align with the interests of the Chinese Communist Party. Non-PRC contract manufacturers are increasingly being pulled into the PRC’s transfer and alignment ecosystem. This pattern is illustrated by Taiwanese firms that show growing links to Party organizations, even if they do not exhibit clear evidence of the highest-risk forms of military entanglement seen in PRC firms. Western firms that work with contract manufacturers should be aware of the security and technology spillover risks in this environment and consider the necessary steps to mitigate them. Absent an understanding of the integrated ecosystem the CCP is constructing, these firms risk exacerbating patterns of behavior that have had negative effects on Western industrial strength. – Contract Manufacturing and Technology Transfer Risks – Jamestown