Ex-Samsung Elec executive accused of stealing secrets for China chip factory

[June 12, 2023]  By Soo-hyang Choi

SEOUL (Reuters) -A former executive at South Korea's Samsung Electronics was indicted on Monday on suspicion of stealing company technology for a copy-cat chip factory in China and jeopardising national economic security, prosecutors said.

South Korea is a chipmaking powerhouse, increasingly pressed by the geopolitical and economic rivalry between the United States and China. Last week, President Yoon Suk Yeol described chip industry competition as "all-out war".

The defendant, who also formerly worked at SK Hynix as a vice president, is accused of illegally acquiring Samsung data to build a rival factory only 1.5 km (1 mile) away from a Samsung chip manufacturing facility in Xian, China, the Suwon District Prosecutors' Office said in a statement.

Prosecutors said they estimated the theft of data to have caused at least 300 billion won ($233 million) worth of losses for Samsung Electronics.

"It's a grave crime that could deal a heavy blow to our economic security by shaking the foundation of the domestic chip industry at a time of intensifying competition in chip manufacturing," the prosecutors' office said.

The defendant, arrested last month, is denying the allegations, a prosecutor said.

The suspect, who officials did not identify, worked a combined 28 years at the South Korean chipmakers, prosecutors said.

Reuters was not immediately able to reach him for comment.

Samsung Electronics and SK Hynix declined to comment.

The trial date had yet to be confirmed by the court in which the indictment has been filed.

The attempt to build the new plant using Samsung data between 2018 and 2019 ended in failure due to funding issues, a prosecutor said.

Prosecutors said they had indicted six other people for their suspected involvement, including an inspection company employee accused of leaking the architectural plan of Samsung's semiconductor factory.

POLICE ACTION

The indictment comes as South Korea has vowed to step up support for its chip sector.

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

While Samsung and SK Hynix depend on U.S. technology and equipment, about 40% of South Korea's chip exports go to China, trade ministry data showed.

Although China was a latecomer to memory chip production, its firms have caught up rapidly to South Korean competitors.

Seoul-based analysts estimate a technology gap of only two years or less between NAND Flash chips made by China's YMTC and industry leaders such as Samsung Electronics and SK Hynix.

The South Korean firms have a practice of developing a cutting-edge chip in South Korea first, then only making them in their China factories after a year or so, partly to stave off leaks of the latest technology, the analysts said.

South Korea has been cracking down on corporate spying in recent months.

On Sunday, police said they had arrested 77 people involved in 35 cases of suspected industrial espionage in a nationwide investigation over the past four months.

"We will sternly deal with any leakage of our technology abroad and strongly respond to illegal leak of domestic companies' core technologies in semiconductor, automobile and shipbuilding sectors among others," a national police official said in a statement.

($1 = 1,287.7700 won)

(Reporting by Soo-hyang Choi; Additional reporting by Joyce Lee; editing by Raju Gopalakrishnan and Jason Neely)

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