Korea to get tough on industrial espionage from China

Tech

Published: 16 Jun. 2023, 18:20 Updated: 18 Jun. 2023, 14:57

Korea to get tough on industrial espionage from China

Flag of China on a processor [SHUTTERSTOCK]

Korea is set to toughen criminal punishments on technology theft following a series of highly publicized data leaks, often involving Chinese businesses and employees at leading chipmakers like Samsung Electronics and SK hynix.

The Supreme Court of Korea will strengthen sentencing guidelines for crimes related to leaking information on sensitive technology overseas by upping the proposed sentence range, the court announced on Tuesday.

Critics have blamed weak punishments for hindering efforts to curb industrial data theft, with the average sentence for leaking trade secrets to a foreign country just 14.9 months last year, according to the Supreme Prosecutors’ Office.

The move also comes as Chinese efforts to steal trade secrets from leading Korean chipmakers and display producers grow more sophisticated and aggressive in an apparent bid to mitigate damage from the U.S. push to cut off China from American technology and expertise.

Most recently, a former Samsung Electronics executive was charged for allegedly leaking at least 300-billion-won ($232.7 million) in trade secrets to build a copycat chip factory in China. The 65-year-old suspect, surnamed Choi, illicitly acquired basic engineering data and the plant layout used in Samsung’s chip factory, classified as national core technology under the law.

Park Jin-sung, a senior prosecutor at Suwon District Prosecutors Office, announces on June 12 the interim results of an investigation into a former Samsung Electronics executive who allegedly leaked trade secrets to build a chip factory in China. [YONHAP]

Choi who headed a chip company called CHJS, which was funded by the Chengdu city government, attempted to build a chip factory in China just 1.5 kilometers (0.9 miles) from Samsung Electronics' manufacturing plant in Xi'an. But the project fell through due to the company's failure to secure promised funding from a Taiwanese chipmaker. He had hired 200 engineers at the Chengdu-based company, mainly from Samsung and SK hynix.

Six other accomplices were also charged, mostly workers at CHJS and Samsung’s Xi’an factory.

Despite the scheme being busted, some industry sources believe that key information could have already been leaked to Chinese companies since Choi had operated CHJS since 2020.

The case alarmed the government and industry owing to its scale and orchestration.

“In the past, the most common strategy was for Chinese chip companies to lure Korean engineers to their factories in China with handsome salaries double or triple what they were previously making,” said an executive at Samsung Electronics who spoke on the condition of anonymity.

“But now they build offices in Gyeonggi in areas like Pangyo and let them work there and send critical information to them,” the executive said.

As home to household names such as Samsung Electronics, LG Electronics and Hyundai Motor, Korea has been struggling to counter an increasing number of technology thefts, with intellectual properties for advanced chips, electric vehicle batteries and displays the primary targets.

The number of confirmed leaks of so-called national core technologies totaled 93 between 2018 and 2022, with damages estimated at 25 trillion won ($20 billion), according to the National Intelligence Service.

Experts say lenient penalties in the country contributed to increasing industrial data theft.

Though a revision to the Unfair Competition Prevention and Trade Secret Protection Act upped the maximum sentence for leaking industrial information abroad to 15 years and a fine of up to 1.5 billion won in 2019, actual verdicts hardly reflected this.

One reason is that the sentencing guidelines from the country’s top court still call for sentences between one year and three years and six months.

“The sentencing guideline hasn’t changed since 2017 and lags behind the standard set by the law,” said Cho Yong-sun, an industrial security professor at Hansei University.

“And since many of the convicted are first offenders and white-collar criminals, they often get away with suspended sentences,” he said at a forum on revising the sentencing guidelines in May.

Only 10.6 percent of individuals convicted of leaking industrial information at home and abroad between 2019 and 2022 were actually sentenced to jail time, according to the Korean Intellectual Property Office.

As much as the legal system needs to improve, many still question the efficiency of it.

“There is an inherent limitation of the legal system to root out such intellectual theft cases,” said Jeong In-seong, a semiconductor specialist who authored "The Future of the Semiconductor Empire."

“A law designed to prevent the leaking of trade secrets or industrial technologies does exist, but it will inevitably conflict with the issue of privacy in tracking engineers, which makes it incapable of efficiently detecting potential theft,” he said.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]