Former Samsung Electronics Executive Charged With Stealing Technology For Copy Chip Factory In China

JAKARTA - On Monday, June 12, a former Samsung Electronics executive was charged with alleged theft of company technology to build a mock chip factory in China and threaten national economic security, prosecutors said.

South Korea is a chipmaker power that is increasingly under pressure by geopolitical and economic competition between the United States and China. Last week, President Yoon Suk Yeol described competition in the chip industry as a "total war".

The defendant, who has also worked as vice president at SK Hynix, was accused of illegally obtaining Samsung data to build a competitor factory only 1.5 km from Samsung's chip production facility in Xian, China, the Suwon District Prosecutor's Office said in a statement.

Prosecutors said they expect the data theft to have caused a loss of at least 300 billion won (Rp 3.4 trillion) to Samsung Electronics.

"This is a serious crime that could strike a heavy blow to our economic security by shaking the foundation of the domestic chip industry as competition in chip production gets tighter," the prosecutor's office said.

According to the prosecutor, the defendant, who was arrested last month, denied the allegations.

The suspect, who was not identified by officials, worked 28 years at a South Korean chipmaker.

Samsung Electronics and SK Hynix declined to comment on the report. Meanwhile, the date of the trial has not been confirmed by the court where the charges have been filed.

"Efforts to build a new factory using Samsung data between 2018 and 2019 ended in failure due to funding problems," said a prosecutor.

Prosecutors said they had indicted six other people on suspicion of their involvement, including an employee of an inspection company accused of leaking about Samsung's semiconductor factory architectural plans.

The indictment comes as South Korea has pledged to increase support for its chip sector.

Samsung and SK Hynix, the world's top two chipmakers, have invested billions of dollars in chip factories in China.

Although Samsung and SK Hynix rely on US technology and equipment, about 40% of South Korean chip exports go to China, according to data from the Ministry of Trade.

Although China has been a participant lately in memory chip production, Chinese companies have quickly pursued their competitors.

Recent investigations suggest that there is a technology gap of only two years or less between the NAND Flash chip made by China's YMTC and industry leaders such as Samsung Electronics and SK Hynix.

The South Korean companies have a policy to develop advanced chips in South Korea first, then produce them in their factories in China after a year or so, in part to prevent a leak of the latest technology, analysts said.

South Korea has taken action against the company's espionage in recent months.

On Sunday, June 11, police announced that they had arrested 77 people involved in 35 cases of alleged industrial espionage in a nationwide investigation over the past four months.

"We will handle firmly any of our technological leaks abroad and firmly respond to the illegal leakage of core technology of domestic companies in the semiconductor, automotive, and shipyard sectors, among others," a national police official said in a statement.