Chinese Competitors Steal South Korean Semiconductor Secrets: Industrial Spies Convicted

A view of a chip manufactured on a semiconductor wafer using silicon as the raw material. The photo is not directly related to the article. [Photo=SK Hynix]

Four industrial spies who leaked key domestic semiconductor wafer manufacturing technologies to a fledgling Chinese competitor have been sentenced to prison four years after the crimes were exposed.

According to sources within the legal community, the Daegu District Court’s Western Branch, presided over by Judge Kim Hee Young, handed down prison sentences on the 10th to four defendants charged under the Unfair Competition Prevention and Trade Secret Protection Act. The sentences ranged from one year to two and a half years. Three defendants were taken into custody immediately following the verdict, with the fourth, who had cooperated with the investigation, not being detained.

The Daegu-based company, led by its CEO, specializes in manufacturing semiconductors and solar power generation equipment. It was recently fined approximately $253,000.

They are accused of leaking two key technical documents related to the single crystal growth and processing technology used for semiconductor wafer manufacturing from a domestic victim company to a fledgling semiconductor wafer manufacturing company in Shanghai, China, from August 2015 to March 2018.

The victim company’s single crystal growth and processing technology is an advanced technology defined in the Act on the Prevention of Leakage and Protection of Industrial Technology. The key documents handed over to China are trade secrets developed by the victim company through considerable research expenses and efforts since 1999.

The company, led by its CEO, previously specialized in manufacturing and selling single crystal growth equipment for solar power generation until 2015. As the domestic solar industry began to falter and sales declined sharply, the company was compelled to undertake restructuring measures, which included staff layoffs.

When a Chinese company requested semiconductor single crystal growth equipment, the CEO’s company agreed to supply it despite lacking the necessary expertise and technology to enhance its business. Subsequently, the CEO conspired with two other defendants to produce parts design drawings using another company’s core technology and then provided these drawings to the Chinese company.

The investigation uncovered that two defendants had leveraged their previous employment at the victim’s company to facilitate their criminal activities. One of them had taken core technical reports from the company upon their departure. Additionally, another individual was found to have acquired a different set of the company’s essential technical documents through improper means from a subcontractor based in Gumi that was associated with the victim’s company.

The National Intelligence Service detected the crimes involving the CEO and others in June 2020 during their efforts to combat leaks of industrial technology. The case was subsequently transferred to the prosecution for further action.

During the nearly four-year investigation and trial, the Chinese company developed advanced technical skills in semiconductor single crystal growth and processing using the smuggled technology from the victim’s company. Meanwhile, the CEO’s company also profited significantly from exporting equipment in the related field.

The court stated, “The defendants used and leaked the victim company’s trade secrets for unjust gain, knowing well that they would be used in China.” It pointed out, “If such crimes are lightly punished, it will allow foreign competitors to easily steal the technological capabilities that our companies have built up through strenuous efforts.”