Ex-Samsung executive accused of stealing technology to rebuild chip plant in China

A former Samsung Electronics executive has been arrested in South Korea and charged with building a copycat plant in China to allegedly steal the leading chipmaker’s technology.

The indictment of the 65-year-old Korean national, who also served as a vice president at rival Korean chipmaker SK Hynix, seeks to bolster South Korea’s defense against a concerted drive by Chinese companies to acquire cutting-edge technology. Korean Technologies.

A former Samsung vice president, who has not been named, illegally obtained information needed to build advanced chipmaking facilities, according to a statement released Monday by Korean prosecutors.

Prosecutors said their plan was to replicate the semiconductor factory just 1.5 km from Samsung’s memory chip plant in Xi’an, western China.

“This is not a simple semiconductor tech leak, but an attempt to copy an entire chip plant,” the Suwon District Prosecutor’s Office said in a statement.

“The scope and damage of the crime is incomparable to previous individual tech leak cases,” the statement said. “If the domestic plant was copied and similar quality products were mass-produced in China, it would cause irreparable harm to the (Korean) semiconductor industry.”

The former executive hired around 200 employees from Samsung and SK Hynix for a company he founded in Chengdu in China’s Sichuan province. According to the indictment, he was allegedly tasked with obtaining trade secrets from his former employers that cost Samsung an estimated $230 million.

“Samsung strictly forbids outsiders from entering its chip plants because the design of the factory and its equipment layout are closely related to productivity and product quality,” said Lee Dong-hwan, a former state investigator who is now WeFocus, working as a patent attorney in Seoul. based law firm.

“But the company, despite its robust security systems, has no way to prevent a technical leak if a senior executive with good access to comprehensive and high-quality information knowingly passes it on to Chinese competitors,” he said. .

Samsung Electronics and SK Hynix, the world’s two leading memory chip makers, both have plants in China. Their technologies are considered by industry experts to be more advanced than those of their major Chinese competitors.

Last year, the US government granted Korean companies a one-year exemption from export controls designed to undermine China’s ability to develop high-end chips. The FT reported last month that Washington had indicated it would allow US chipmaking equipment to be sent to China for at least another year.

Among the trade secrets the former executive has been accused of stealing were information related to keeping impurities out of advanced chip plants, and the floor plans and dimensions needed for several processes at Advanced Chip-Making Technologies.

But his plan backfired after he failed to secure an allegedly promised $6.2bn investment by an undisclosed Taiwanese company for a company set up in Singapore.

Instead, he raised more than $350 million from Chinese investors to produce the trial products from a plant in Chengdu. According to prosecutors, the construction of the Chengdu plant was also based on technology stolen from Samsung.

Six other people were also charged in the same case on Monday, including an employee of a Samsung subcontractor and five employees of the executive’s Chinese chip maker.

As technological competition between the US and China intensifies, Chinese companies have stepped up efforts to acquire Korean expertise in key technologies in industries ranging from semiconductors to electric car batteries and displays, and including shipbuilding.

In February, seven people, including former employees of SAMS, a Samsung Electronics subsidiary specializing in the production of wafer cleaning equipment, were given prison terms for transferring stolen technologies to a Chinese company.

The South Korean government has also established several new investigative bodies to deal with leaks, passed legislation calling for tougher penalties and made it easier to report suspected breaches.