Taiwan prosecutors have charged two local executives with helping a Chinese chip company secretly run research operations on the island for years, a blow to Beijing-linked firms trying to tap Taiwan's engineering talent and a warning to locals who front for them.

• Nanjing Incodi Microelectronics, which makes display controller and Mini-LED driver chips, used a Taipei company called Daofeng Technology as cover to hire engineers and develop display algorithms starting in 2021.
• A year later the company set up a second front, Fengzhou Technology, to spread risk, and pushed its hidden research footprint into Hsinchu, Taiwan's chip hub.
• Employees were officially on the Taiwanese firms' payrolls, but Incodi's Chinese boss controlled hiring and finances, paid the bills, and sold everything the teams produced.
• Prosecutors charged the Taiwan R&D chief and Fengzhou's head under the cross-strait relations law for running unlicensed business activity; two others got deferred prosecution, and both front companies have already been dissolved.

Outlook: Taiwan is tightening enforcement against unregistered Chinese tech operations poaching its chip talent, so expect more of these cases and more caution from local engineers working for Chinese-backed startups.