Former Samsung executive charged over alleged plans to build copycat chip factory in China

By Michelle Toh and Gawon Bae, CNN

Hong Kong/Seoul (CNN) — South Korean prosecutors have indicted a former Samsung executive for allegedly working with competitors who tried to build a copycat semiconductor factory in China.

In a Monday statement, the Suwon district prosecutor’s office said it had charged a 65-year old former employee of what it called “Company A” over data theft.

While officials did not explicitly name the company, they described it as “the world’s number one market share holder in the memory and semiconductors field.”

Samsung (SSNLF) is the world’s leading memory chip maker and is the company described by prosecutors, according to a person familiar with the matter. Samsung (SSNLF) declined to comment.

The defendant, who wasn’t identified, 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, according to the prosecutor’s office.

Prosecutors said the executive then tried to use that information to build a “duplicate” plant in the Chinese city of Xi’an, about 1.5 kilometers (one mile) away from a Samsung semiconductor factory.

“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 defendant is widely known as the “best expert” in South Korea’s chipmaking industry, having worked at Company A for about 18 years and then as vice president of another firm, referred to as “Company B,” for about 10 years, according to authorities.

News agency Yonhap identified the second company as SK Hynix, another South Korean chip giant. The company did not immediately respond to a request for comment.

Prosecutors allege that the defendant even recruited more than 200 key tech workers from both firms in South Korea, promising them high salaries.

The defendant is now accused of violating fair competition rules as well as the Industrial Technology Protection Act, a law aimed at protecting the country’s technological prowess and national security.

Six accomplices have been prosecuted, prosecutors added.

In recent months, a series of curbs have been announced by the United States, the Netherlands and Japan to clamp down on sales of chipmaking equipment to China as part of a coordinated international effort led by Washington. Beijing has strongly opposed such measures.

If the defendant had successfully gone through with his plan to build the plant, and mass produce chips of a similar quality to that of their former employers, it would have caused “irreparable damage” to South Korea’s semiconductor industry, prosecutors said.

Reuters reported that the attempt to build the new plant using Samsung data between 2018 and 2019 ended in failure due to funding issues.

The-CNN-Wire
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