Former Samsung exec accused of leaking secret chip tech data to China

The defendant has been accused of violating industrial technology protection laws and stealing trade secrets between 2018 and 2019. 

The former Samsung executive was reportedly looking to use the illegally acquired data to build a factory in the northwestern Chinese city of Xian, just 1.5km from the Samsung chip factory in the city, the Suwon District Prosecutors' Office said in a statement.

The defendant has been charged of “wrongfully using” engineering data from the company’s semiconductor factory, as well as its floor plan, description of core production processes and design drawings.

The prosecutors revealed that the plan to build the copycat factory fell through after the defendant's backer, purportedly an undisclosed Taiwanese company, cancelled a $6bn (£4.8bn) investment in the project.

Instead, he received capital from investors in China and Taiwan to produce trial chip products based on Samsung’s technology, prosecutors said. 

“Using the expertise and authority in the semiconductor manufacturing field gained while working for a local major company, the accused has colluded with large capital [investors] in China and Taiwan to establish a semiconductor manufacturing company in China and Singapore,” the office said.

The identity of the executive has not been revealed, although authorities said he is 65 years old and a former vice president of SK Hynix. He was said to have worked a combined 28 years at Samsung Electronics. 

The Suwon district prosecutor’s office also refused to identify the company for which the defendant worked. It was referenced “Company A” and described as “the world’s number one market share holder in the memory and semiconductors field.” The description, however, matched Samsung Electronics, and a source familiar with the matter confirmed this information to Reuters. 

The data theft was estimated to have inflicted at least $23m (£18m) worth of losses to Samsung Electronics, according to prosecutors. If successful, the copycat plant would have caused “irreparable damage” to South Korea’s semiconductor industry.

"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.

Six other people have also been indicted for collaborating with the executive, and enabling the crime, prosecutors said. This includes an inspection company employee accused of leaking the architectural plan of Samsung's semiconductor factory.

The news can be understood in the context of a US-China trade war, as well as supply chains’ efforts to address the surge in demand for semiconductors used in consumer electronics.

The US has restricted China’s access to semiconductor technology since at least 2019 when the Trump administration banned Huawei from buying vital US technology. However, for these restrictions to be effective, the US needs other key suppliers to agree to similar controls and has reached agreements  in this regard with Japan and the Netherlands.   

In December, China launched a trade dispute at the World Trade Organization against the US’s chip export control measures, saying the curbs “threaten the stability of the global industrial supply chains”.