Ex-Samsung Executive Indicted For Alleged Data Leak To China

Techspace - South Korean prosecutors say they indicted a former Samsung Electronics executive on Monday, June 11 on charges of stealing trade secrets for the chip giant to build a copycat chip factory in China.

The 65-year-old former executive, whose name has been withheld, was charged with violating the law on the protection of industrial technology and the prevention of unfair competition, according to the Suwon District Prosecutor's Office.

The defendant, who also worked at SK Hynix as vice president, is accused of illegally obtaining Samsung data and attempting to build a complete Samsung semiconductor factory in China after illegally obtaining confidential company data, including chip manufacturing basic engineering data (BED) and process layouts as well. design drawings, from August 2018 to 2019, the Suwon District Prosecutors' Office said in a statement.

The prosecution also indicted six other people namely one employee of a subcontractor of Samsung Electronics and five employees of a Chinese chip maker founded by former executives without being eliminated on charges of colluding in alleged technology breaches.

BED is the technology needed to ensure zero impurities in semiconductor manufacturing facilities. The process layout contains information about the floor plan and dimensions of the chip mill's eight core processes for semiconductor production. An important trade secret for the manufacture of sub-30-nano DRAM and NAND flash chips is considered a national core technology.

According to prosecutors, the former executive had attempted to use stolen technology and data to build a Samsung Electronics chip factory just 1.5 kilometers from the company's chip factory in Xian, west China. But the plans failed to materialize because the Taiwanese company barred its promise to invest 8 trillion won ($6.2 billion) in the project, they said.

Instead, the former executive reportedly received a 460 billion won investment from Chinese investors and produced test products from a chip-making factory built on Samsung's technology in Chengdu last year.

Chinese goods chip manufacturers are known to have sold around 200 people from Samsung and SK Hynix. He allegedly instructed his employees to obtain and use Samsung's semiconductor design data and other trade secrets and they engaged in the crime according to his instructions, prosecutors said, estimating Samsung suffered losses of at least 300 billion won due to the technology leak.

As of now, the trial date has not been confirmed by the local court where the indictment was filed. The accused, who was arrested last month, worked for 28 years at a South Korean chip maker, prosecutors said. Officials did not identify the suspects.

Prosecutors said their theft of data had caused losses of at least 30 billion won ($23 million) for Samsung Electronics.

"This is a felony that can deal a heavy blow to our economic security by destroying the foundations of the domestic chip industry at a time of increasing competition in chip manufacturing," the prosecutor's office said.

Samsung Electronics did not immediately respond to a request for comment, and SK Hynix declined to comment.

The indictment comes as South Korea has pledged to increase support for its chip sector, with President Yoon Suk Yeol describing competition in the industry as an "all-out war" amid heightened Sino-US tensions.

South Korea's Samsung and SK Hynix, two of the world's top memory chip makers, have invested billions of dollars in chip manufacturing in China.

Earlier in April, South Korea pledged support for the chip sector with President Yoon Suk Yeol describing competition in the industry as an "all-out war" amid escalating US-China tensions.

President Yoon Suk Yeol has met with about 60 industry leaders, lawmakers, and ministers to discuss how to maintain South Korea's lead in memory chips, push forward the development of semiconductor systems, and secure materials, equipment, and manpower.

The government plans to help expand research and development, strengthen smaller players, strengthen legal protections for chip technology, and set up chip testing facilities, industry purchases said in a reserve.

South Korea has been trying to stay out of the tit-for-tat row between China and the United States over semiconductors.

On the one hand, chipmakers Samsung Electronics and SK Hynix rely on US technology and equipment. At the same time, about 40 percent of South Korea's chip exports went to China, according to trade policy data.