Former Samsung Executive Arrested in South Korea for Allegedly Stealing Chipmaking Technology for Chinese Plant

A former executive at Samsung Electronics has been arrested and indicted in South Korea for allegedly stealing the leading chipmaker's technology with the intention of building a copycat plant in China. The 65-year-old Korean national, who also served as a vice president at rival Korean chipmaker SK Hynix, faces charges as South Korea intensifies its efforts to safeguard cutting-edge technologies from Chinese companies.

According to Korean prosecutors, the former Samsung vice president, whose identity remains undisclosed, unlawfully obtained information crucial for constructing advanced chipmaking facilities. Prosecutors assert that his plan was to replicate a semiconductor factory located only 1.5 km away from Samsung's memory chip plant in Xi'an, China.

The Suwon District Prosecutors' Office stated, "This is not a simple semiconductor tech leak but an attempt to copy a whole chip plant." They emphasized that the scope and potential damage caused by this act far surpass previous individual tech leak cases. If the domestic plant were successfully copied, leading to mass production of similar quality products in China, irrecoverable losses to the Korean semiconductor industry would ensue.

Allegedly, the former executive established a company in Chengdu, China's Sichuan province, and hired approximately 200 employees from Samsung and SK Hynix. These employees were reportedly tasked with acquiring trade secrets from their former employers, resulting in an estimated $230 million loss for Samsung, according to the indictment.

Lee Dong-hwan, a former state investigator now working as a patent attorney at WeFocus, a Seoul-based law firm, highlighted the challenge faced by Samsung. He stated, "Samsung strictly forbids outsiders from entering its chip plants because the factory design and its equipment layout are closely related to productivity and product quality." However, it is difficult to prevent tech leaks when a senior executive with broad and high-quality access intentionally divulges information to Chinese competitors.

Both Samsung Electronics and SK Hynix, recognized as two of the world's leading memory chipmakers, have plants in China. Industry experts regard their technologies as more advanced than those of their Chinese counterparts.

Last year, the US government granted the Korean companies a one-year exemption from export controls aimed at limiting China's development of high-end chips. Washington recently signaled its intent to extend permission for the export of US chipmaking tools to China for at least another year.

The former executive is alleged to have stolen various trade secrets, including information on maintaining purity in advanced chip plants, as well as floor plans and dimensions crucial to several processes in advanced chipmaking technologies.

However, his plan unraveled when he failed to secure a promised $6.2 billion investment from an undisclosed Taiwanese company for his Singapore-based venture. Instead, he managed to raise just over $350 million from Chinese investors to produce trial products at a plant in Chengdu. Prosecutors assert that the construction of the Chengdu plant was also based on technology stolen from Samsung.

In connection with this case, six other individuals were indicted on Monday, including an employee of a Samsung subcontractor and five employees of the former executive's Chinese chipmaking company.

As the technological competition between the US and China escalates, Chinese companies have intensified their efforts to acquire Korean expertise in critical areas such as semiconductors, electric car batteries, displays, and shipbuilding.

To combat such leaks, the South Korean government has established several new investigatory bodies, enacted legislation to strengthen penalties, and simplified the process of reporting suspected violations.