A former executive at South Korea’s tech giant Samsung Electronics has been indicted on suspicion of stealing company technology for the establishment of a copycat chip factory in China. This alleged act has raised concerns about national economic security, as South Korea is a major player in the global chipmaking industry. The indictment emphasizes the severity of the crime and its potential impact on the domestic chip industry, which is already facing intense competition. The accused, a former vice president who also worked at SK Hynix, denies the allegations, setting the stage for a high-stakes trial.

The Suwon District Prosecutors’ Office revealed that the defendant illegally obtained Samsung data to construct a rival factory situated a mere 1.5 kilometers away from a Samsung chip manufacturing facility in Xian, China. Prosecutors estimate that the stolen data caused losses amounting to at least 300 billion won ($233 million) for Samsung Electronics. This illicit act poses a grave threat to the country’s economic security, shaking the very foundation of the domestic chip industry. Given the intensifying competition in chip manufacturing, the impact could be far-reaching and long-lasting.

Despite being arrested last month, the defendant maintains innocence, vehemently denying any involvement in the theft. The trial date is yet to be confirmed by the court where the indictment has been filed. The legal battle is expected to shed light on the extent of the alleged theft and its implications for both Samsung Electronics and the broader semiconductor sector.

The prosecutors have also indicted six additional individuals for their suspected roles in the incident. Among them is an employee from an inspection company accused of leaking the architectural plan of Samsung’s semiconductor factory. These accomplices further highlight the complexity and magnitude of the alleged trade secret theft.

This case comes at a time when South Korea is determined to strengthen support for its chip sector, given the rising importance of semiconductor technology globally. Samsung and SK Hynix, two of the world’s leading memory chip manufacturers, have invested substantial amounts in chip factories in China. While Korean companies heavily rely on US technology and equipment, approximately 40% of South Korea’s chip exports are destined for China. Notably, Chinese firms have made remarkable progress in catching up to their South Korean counterparts in memory chip production. Industry analysts estimate a technology gap of two years or less between NAND Flash chips produced by Chinese company YMTC and those made by Samsung Electronics and SK Hynix.

To safeguard valuable technologies, South Korean firms typically develop cutting-edge chips in their home country before commencing production in their Chinese factories, aiming to mitigate the risk of leaks. However, recent developments have led to increased scrutiny and efforts to combat corporate espionage. South Korea has been actively cracking down on such activities, as evident in the arrest of 77 individuals involved in 35 suspected cases of industrial espionage over the past four months. Authorities are determined to firmly address technology leakage and respond strongly to illegal dissemination of core technologies from domestic companies, particularly in the semiconductor, automobile, and shipbuilding sectors.

Source: Reuters