His name is still unknown, but his actions are not: This week, prosecutors in South Korea indicted a former senior employee of local chip giants Samsung and SK Hynix for attempting to copy an entire chip factory in China.
According to the indictment, he and six other people are said to have tried in 2018 and 2019 to build a new processor factory in the Chinese metropolis of Xian, just 1.5 kilometers away from a Samsung semiconductor plant. One of those involved, a Samsung inspector, reportedly slipped him the relevant construction plans from Samsung, and an unnamed Taiwanese electronics group apparently offered capital.
Ultimately, the plan probably failed due to lack of funds. But the South Korean prosecutors are taking the process seriously – and not just because of the economic damage, which they estimate at least 230 million US dollars. “This is a serious crime that could deal a serious blow to our economic security,” they write in their complaint. This will shake the foundations of the domestic chip industry at a time when competition in chip manufacturing is intensifying.
A competitive business
South Korea in particular is currently under great pressure. The chip manufacturers are world market leaders in memory chips. Now corporations and the government are trying to take the lead in other areas as well. Only China is no longer the only one working to rob the South Koreans of market share with massive subsidies.
As the largest contract manufacturer of semiconductors, Taiwan’s TSMC is an enormously strong competitor of the South Koreans in the race for the global chip market. In addition, the USA, Japan and Europe are now stepping up to trim their own chip industries back to world level with large gifts of money under the slogan of supply chain security.
Japan has always tried everything possible with electronics – and often the impossible. Every Thursday our author Martin Kölling reports on the latest trends from Japan and neighboring countries.
To make matters worse, the technology war between the USA and China is also hitting South Korea. Because the USA wants to force its ally to restrict the production of and trade in highly developed chips. The irritated political climate may also explain why South Korea’s judiciary now wants to set an example.
The irony is that the South Koreans are being treated to a policy that the then technologically superior Japanese resented decades ago: poaching skilled workers. In this case, the accused South Korean manager even wanted to persuade 200 ex-colleagues to change companies with high fees.
China buys human capital
This kind of human capital-backed technology transfer has worked well in China at least once. The Chinese semiconductor group Semiconductor Manufacturing International Corporation (SMIC) was founded in 2000 by Richard Chang (Chinese Zhang Rujing).
Born in 1948, he first worked for the American computer manufacturer Texas Instruments and later came to TSMC through the purchase of a chip company in Taiwan that he managed. He then used his know-how to build his own empire in the Middle Kingdom with the help of other TSMC managers.
TSMC didn’t put up with that, by the way. It took several years for the company to settle the patent rights dispute with TSMC through cash payments and share packages. In addition, Zhang was banned from running chip companies for three years.
However, this did not harm his fame in the Middle Kingdom: He is still celebrated as the “father of the Chinese chip industry”. This honor will certainly not be given to the South Korean manager who is now accused. A severe penalty is imminent.