Possible article:
Korean chipmaker hit by senior executive’s alleged theft for China copycat factory
A former senior executive of Samsung Electronics and SK Hynix has been arrested and charged by Korean prosecutors for allegedly stealing trade secrets to build a copycat semiconductor factory in China. The 65-year-old Korean national, who has not been named, reportedly acquired information on chip factory design and layout as well as several processes in advanced chip manufacturing technologies needed to build an advanced chip making facility. The former executive then allegedly hired around 200 employees from the rival chipmakers to work for a company he set up in Chengdu, China’s Sichuan province, and tasked them with acquiring further trade secrets. The indictment said the ex-Samsung vice president sought to replicate a semiconductor factory just 1.5 km from Samsung’s memory chip factory in Xi’an, western China.
South Korea is trying to boost its defenses against a concerted campaign by Chinese enterprises to acquire advanced Korean technologies, amid concerns over the loss of competitive advantage and damage to national security. The scale of the alleged crime and damage was described by the Suwon District Attorney’s Office as “incomparable to previous cases of technology leaks.” The former executive’s plan, if successful, would have caused irrecoverable losses to the Korean semiconductor industry, according to the statement. Samsung and SK Hynix are two of the world’s leading memory chip makers, and their technologies are considered by industry experts to be more advanced than those of their main Chinese competitors.
The case has highlighted the challenges faced by Korean companies in protecting their intellectual property from determined and well-resourced Chinese rivals, at a time of heightened global competition in high-tech industries. The United States has also taken measures to restrict technology transfer to China, while Chinese companies have become more innovative and aggressive in seeking foreign expertise.
Examples of the risks facing Korean chipmakers include the following recent incidents:
– In February, seven people, including former employees of Semes, a subsidiary of Samsung Electronics specializing in the production of wafer cleaning equipment, were sentenced to prison terms for transferring stolen technology to a Chinese company.
– In 2020, US authorities gave Korean companies a one-year reprieve from export controls that were aimed at reducing China’s ability to develop high-end chips. The US has reportedly signaled it would extend permission to send US chip-making tools to China for at least a year, despite objections from US lawmakers and some industry groups.
– Korean companies have raised concerns over the hiring of Korean engineers by Chinese competitors, who offer higher salaries and more competitive benefits. The Korean government has set up several new investigative bodies to crack down on leaks, passed legislation to toughen penalties, and made it easier to report suspected violations.
The investigation also sheds light on the importance of securing trade secrets throughout the supply chain, including key subcontractors and their employees. Samsung Electronics reportedly has strict measures in place to prevent foreigners from entering its chip factories, but the current case shows that senior executives with broad access to confidential information can still cause damage to the company’s competitiveness and reputation.
Possible additional piece:
Beyond IP theft: the new frontiers of technology competition
The theft of trade secrets and intellectual property (IP) has long been a concern for high-tech companies and governments, as these intangible assets are seen as key drivers of innovation, growth, and national security. However, the focus on IP theft has overshadowed other forms of technology competition that may have equally significant impacts on the global balance of power. In this article, we explore some of the emerging trends and challenges in the technology race, and discuss their implications for businesses, policymakers, and society.
1. Talent wars: In addition to stealing trade secrets, Chinese companies have been aggressively recruiting foreign engineers and researchers to work in China, offering higher salaries, better benefits, and more opportunities for career growth. This has created a brain drain in some countries, especially in Asia, where skilled labor is a scarce resource. While talent mobility can enhance innovation and knowledge transfer, it can also erode the competitiveness of countries and companies that lose their best and brightest. To address this challenge, some countries are adopting measures to retain and attract talent, such as tax incentives, immigration policies, and research collaborations.
2. Standards wars: As new technologies such as 5G, AI, and the Internet of Things (IoT) converge and reshape industries, the battle for setting standards that govern their interoperability, security, and reliability becomes more critical. By controlling the standards, countries and companies can gain significant market power and influence global innovation. China, for instance, has been pushing for a more prominent role in international standard-setting organizations and promoting its own standards, such as Huawei’s proposed 5G standard. The US and other Western countries have raised concerns over the security and geopolitical implications of Chinese-led standards, arguing that they may compromise privacy, freedom of expression, and democratic values.
3. Regulatory wars: With the rise of digital platforms, network effects, and data-driven business models, the regulatory landscape for technology firms has become more complex and contested. Countries and regions have adopted different approaches to regulating tech companies, ranging from laissez-faire policies to draconian measures. China has been criticized for its tight control of the internet, its censorship regime, and its use of foreign digital platforms for surveillance purposes. The US and Europe have taken steps to limit the power and market dominance of big tech firms, such as antitrust investigations, privacy regulations, and content moderation rules. The differences in regulatory regimes may create barriers to entry, fragmentation, and conflicts of interest that hamper cross-border collaboration and innovation.
4. Sustainability wars: As environmental and social issues gain more attention and urgency, the technology sector faces new challenges and opportunities in promoting sustainable development. The extraction, production, consumption, and disposal of digital devices and services have significant environmental impacts, such as carbon emissions, e-waste, and resource depletion. The proliferation of social media, online hate speech, and disinformation has also raised concerns over the ethical and social implications of technology. Companies and governments are under pressure to address these issues proactively and transparently, while balancing economic growth and social responsibility. Some firms, such as Apple and Google, have set ambitious goals for carbon neutrality, renewable energy, and circular economy. Others, such as Facebook and Twitter, have faced criticism over their role in facilitating harmful content and inaction on hate speech.
Conclusion:
The technology race is not just about IP theft, but about broader and deeper forms of competition that shape the future of society. By understanding these trends and challenges, businesses, policymakers, and society can better prepare for the opportunities and risks of the digital age. A multidisciplinary and inclusive approach is needed to balance innovation, security, sustainability, and ethics, and to foster a more resilient and equitable global system.
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A former Samsung Electronics executive has been arrested and charged in South Korea for allegedly stealing technology from the major chipmaker to build a copycat factory in China.
The indictment of the 65-year-old Korean national, who had also served as vice-chairman of rival Korean chipmaker SK Hynix, comes as South Korea tries to strengthen its defenses against a concerted campaign Chinese enterprises to acquire advanced Korean technologies.
According to a statement released Monday by Korean prosecutors, the former Samsung vice president, who has not been named, illegally acquired information needed to build advanced chip manufacturing facilities.
His plan, prosecutors said, was to replicate a semiconductor factory just 1.5 km from Samsung’s memory chip factory in Xi’an, western China.
“This is not just a technology leak in the semiconductor field, but an attempt to copy an entire chip factory,” the Suwon District Attorney’s Office said in a statement.
“The scale of the crime and damage is incomparable to previous cases of technology leaks,” the statement added. “If the domestic factory had been copied and similar quality products had been mass-produced in China, it would have caused irrecoverable losses to the company. [Korean] semiconductor industry.”
The former executive hired around 200 employees from Samsung and SK Hynix for a company he set up in Chengdu, China’s Sichuan province. They were allegedly tasked with acquiring trade secrets from their former employers, which would cost Samsung about $230 million, according to the indictment.
“Samsung strictly prohibits foreigners from entering its chip factories because factory design and equipment layout are closely related to productivity and product quality,” said Lee Dong-hwan, a former state investigator who now works as a patent attorney at WeFocus, a Seoul-based law firm.
“But there is no way for the company, despite its strong security systems, to prevent technology leaks if a senior executive with good access to broad, high-quality information intentionally gives it to Chinese competitors. “, he added.
Samsung Electronics and SK Hynix, two of the world’s leading memory chip makers, both have factories in China. Their technologies are considered by industry experts to be more advanced than those of their main Chinese competitors.
Last year, the US government gave Korean companies a one-year reprieve from export controls that were aimed at reducing China’s ability to develop high-end chips. Flight reported last month, Washington signaled it would extend permission to send US chip-making tools to China for at least a year.
Among the trade secrets the former executive allegedly stole were information related to advanced chip factory impurity protection, as well as the floor plans and dimensions needed for several processes in advanced chip manufacturing technologies.
But his plan fell apart after he failed to secure a $6.2 billion investment allegedly pledged by a joint-stock Taiwanese company for a company he established in Singapore.
Instead, it has raised just over $350 million from Chinese investors to produce trial products from a factory in Chengdu. According to prosecutors, the construction of the Chengdu plant was also based on technology stolen from Samsung.
Six other people were also indicted Monday in the same case, including an employee of a Samsung subcontractor and five employees of the leader’s Chinese chip manufacturing company.
As technology competition between the United States and China intensifies, Chinese companies have stepped up efforts to acquire Korean expertise in critical technologies ranging from semiconductors to electric car batteries and in industries such as screens and shipbuilding.
In February, seven people, including former employees of Semes, a subsidiary of Samsung Electronics specializing in the production of wafer cleaning equipment, were sentenced to prison terms for transferring stolen technology to a Chinese company.
The South Korean government has also created several new investigative bodies to crack down on leaks, passed legislation to toughen penalties, and made it easier to report suspected violations.
https://www.ft.com/content/959f3392-df66-440d-93c1-32dec1dc2b4a
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