A former executive of Samsung Electronics, a major South Korean company, has been indicted for allegedly stealing company technology and using it to establish a chip factory in China, which poses a threat to national economic security, according to prosecutors.
South Korea is a prominent player in the chipmaking industry, facing increasing pressures due to the geopolitical and economic rivalry between the United States and China. Last week, President Yoon Suk Yeol referred to the competition in the chip industry as “all-out war.”
The accused individual, who had also previously held a position as a vice president at SK Hynix, is charged with unlawfully obtaining Samsung’s data to construct a competing factory located only 1.5 kilometers away from a Samsung chip manufacturing facility in Xian, China. The Suwon District Prosecutors’ Office stated that the data theft is estimated to have resulted in losses worth at least 300 billion won ($345 million) for Samsung Electronics.
The prosecutors’ office described the alleged crime as a serious offense that could severely impact economic security by undermining the foundation of the domestic chip industry at a time of intensifying competition in chip manufacturing.
The defendant, who was arrested last month, denies the allegations, according to a prosecutor. The identity of the suspect has not been disclosed.
Samsung Electronics and SK Hynix declined to comment on the matter. The trial date is yet to be confirmed by the court where the indictment was filed.
The attempt to establish the new plant using Samsung’s data, which took place between 2018 and 2019, ultimately failed due to funding issues, as explained by a prosecutor.
In addition to the former executive, prosecutors have indicted six other individuals believed to be involved in the case, including an employee of an inspection company accused of leaking the architectural plan of Samsung’s semiconductor factory.
The indictment comes at a time when South Korea has pledged to enhance support for its chip sector. Samsung and SK Hynix, the world’s top two memory chip manufacturers, have invested billions of dollars in chip factories in China. While these companies rely on US technology and equipment, approximately 40% of South Korea’s chip exports go to China.
Although China initially lagged behind in memory chip production, its companies have rapidly caught up to their South Korean competitors. Analysts in Seoul estimate that there is now only a technology gap of two years or less between NAND Flash chips produced by China’s YMTC and those made by industry leaders such as Samsung Electronics and SK Hynix. The South Korean firms typically develop cutting-edge chips in South Korea first and then initiate production at their China facilities after a year or so, partly to prevent leaks of the latest technology.
In recent months, South Korea has been cracking down on corporate espionage. On Sunday, police announced the arrest of 77 individuals involved in 35 cases of suspected industrial espionage, as part of a nationwide investigation conducted over the past four months. A national police official stated that they will strongly respond to any illegal leaks of domestic companies’ core technologies, particularly in sectors such as semiconductors, automobiles, and shipbuilding.
