Ex-head of Samsung Elec accused of stealing secrets for Chinese chip factory

SEOUL, June 12 (Reuters) – A former executive at South Korea’s Samsung Electronics ( 005930.KS ) was indicted on Monday on suspicion of stealing the company’s technology for a copy factory in China and endangering national economic security, prosecutors said.

South Korea is a chip-making powerhouse, increasingly squeezed by the geopolitical and economic rivalry between the US and China. Last week, President Yoon Suk Yeol described the chip industry̵[ads1]7;s competition as “all-out war”.

The defendant, who also previously worked at SK Hynix (000660.KS) as a vice president, is accused of illegally acquiring Samsung data to build a rival factory just 1.5 km (1 mile) away from a Samsung chip manufacturing plant in Xian, China, the Suwon District Prosecutor’s Office said in a statement.

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

“It is a serious crime that could deal a heavy blow to our economic security by shaking the foundations of the domestic chip industry at a time of increasing competition in chip manufacturing,” prosecutors said.

The defendant, who was arrested last month, denies the charges, a prosecutor said.

The suspect, whom officials did not identify, worked for a total of 28 years at the South Korean chipmaker, prosecutors said.

Reuters could not immediately reach him for comment.

Samsung Electronics and SK Hynix declined to comment.

The trial date had not yet been confirmed by the court where the indictment has been filed.

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

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


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

Samsung and SK Hynix, the world’s two largest manufacturers of memory chips, have invested billions of dollars in chip factories in China.

While Samsung and SK Hynix rely on American technology and equipment, about 40% of South Korea’s chip exports go to China, Commerce Ministry data shows.

Although China was a latecomer to the production of memory chips, the firms have quickly caught up with South Korean competitors.

Seoul-based analysts estimate a technology gap of just 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 it in their factories in China after a year or so, in part to stave off leaks of the latest technology, the analysts said.

South Korea has cracked down on corporate espionage 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 strictly deal with any leakage of our technology abroad and respond strongly to the illegal leakage of domestic companies’ core technologies in the semiconductor, automotive 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

Our standards: Thomson Reuters Trust Principles.

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