Samsung ex-exec tried to set up semiconductor plant in China. It was a copy

By Shinhye Kang

A former Samsung Electronics Co. executive allegedly stole blueprints and designs to try and replicate an entire semiconductor plant in China, Korean prosecutors said, outlining a stunningly ambitious attempt to set up world-class chipmaking capabilities in the world’s No. 2 economy.
 

Prosecutors said in a statement Monday they arrested a 65-year-old accused of stealing trade secrets from 2018 to 2019 to reproduce a chip plant in the northern city of Xi’an, backed by capital from a Taiwanese company they didn’t identify. They didn’t name the company the accused stole from, except to call it the world’s biggest memory chipmaker.

 

“It’s so serious that it’s difficult to compare it in terms of the scale of the crime and the degree of damage with previous individual semiconductor technology leakage cases,” the Suwon District Prosecutors Office in South Korea said in its statement.

The case comes amid rising tensions between Beijing and Washington, where the Biden administration has passed legislation and lobbied allies to keep advanced semiconductor capabilities out of the hands of Chinese companies. Xi Jinping’s government has argued the US is unfairly trying to hold back China’s economic development. 

The case also has the potential to spark tensions between Korea and Taiwan, two of the most important centers for chipmaking and US allies supportive of Washington’s efforts to contain China’s chip ambitions. Taipei and Seoul are very sensitive to attempts by China to poach chip talent and designs from an industry central to both economies’ prosperity.

Representatives for Samsung, which dominates the global market for the memory used in smartphones and computers, declined to comment when contacted by Bloomberg News.

It’s rare to find cases where companies try to replicate entire chipmaking facilities. Most intellectual property cases over the years have focused on attempts to hire away key engineers, appropriate critical designs or reverse-engineer software and components.

The former executive attempted to use the stolen technologies and data to build a copy of a Samsung chip plant 1.5 kilometers away from its existing facility in Xi’an, prosecutors said. But the Taiwanese company, after promising to invest more than $6 billion in the new facility, failed to deliver on that investment, according to Yonhap. 

Instead, the executive turned to a group of Chinese investors and started producing trial products from a chip plant in Chengdu, based on the Samsung technology, the news agency reported. 

The person involved in the latest case worked for Samsung for 18 years before moving to another, unidentified company for about a decade. That person created several chip manufacturing companies in China and Singapore, employing capital from both Chinese and Taiwanese investors, prosecutors said. In the process, the ex-Samsung official hired more than 200 chip experts from Korea and stole valuable data worth at least 300 billion won ($233 million) from Samsung, the indictment read.

Prosecutors also indicted six other individuals, who they alleged were the executive’s accomplices.

(Updates with details on executive’s attempts from eighth paragraph)
 

--With assistance from Katia Dmitrieva, Debby Wu, Peter Elstrom, Sohee Kim and Seyoon Kim.

© 2023 Bloomberg L.P.