Ex-Samsung official indicted for allegedly stealing data to build fab in China

Samsung chip production facility in Xian, China [Photo provided by Samsung Electronics]

A former executive from Samsung Electronics Co. and SK hynix Inc., South Korea‘s two largest chipmakers, has been arrested for allegedly stealing technology to build copycat factory in China.

Industry insiders said that attempts to steal industrial technology have grown to an alarming level amid intensifying competition for advanced chip technology. Lenient punishment for the trade of confidential data also contributed to the increase in moral hazards across the industry.

Prosecutors in the Suwon District Prosecutors’ Office said on Monday that they indicted and detained the former Samsung executive, 65 years old, on charges of violating the country‘s industrial technology protection law. Six individuals were also indicted on similar charges. Prosecutors estimated that the latest theft of technology has caused at least 300 billion won ($232.5 million) worth of losses for Samsung Electronics.

The defendants were charged with stealing Samsung Electronics’ confidential data, including basic engineering data for cleanrooms and processing layouts.

With illegal use of the technology, the defendants attempted to build a rival factory only 1.5 kilometers away from a Samsung chip production facility in Xian, China. According to the statement from prosecutors, the former Samsung executive started two companies in China on the back of investments from Chinese and Taiwanese firms and offered hefty salaries to hire about 200 employees who worked for Samsung Electronics and SK hynix.

Prosecutors said the Chinese city of Chengdu made investments of 460 billion won in one of the two companies found by the defendant.

Theft of data in high-tech industries has grown in recent months. In a separate announcement by the National Police Agency on the same say, incidents of cross-border theft of technology over the last three months increased by 50 percent on year. The Federation of Korean Industries (FKI), South Korea’s major business lobby group, has recently sent a letter of opinion to the Supreme Court, calling for stricter punishment for data theft.

“Government support is necessary to retain retirees and help them to find jobs in the country,” said Kim Yong-seok, a professor at Sungkyunkwan University. “Greater emphasis on work ethics and stronger punishments for violations are also essential.”