When former Samsung executive Choi Jinseog won a contract with Taiwan’s Foxconn in 2018, he leveraged his former employer’s supplier network to steal secrets and help his new client set up a chip factory in China, an indictment alleges. South Korean prosecutors.
Prosecutors announced the indictment on June 12, saying the theft caused more than $200 million (approximately Rs. 16.3 crore) in damage to Samsung Electronics, based on estimated costs Samsung spent to develop the stolen data. The announcement did not name Choi and gave only limited details, although some outlets later identified Choi and his ties to Foxconn.
The unpublished 18-page indictment, reviewed by Reuters, provides details in the case against Choi, including how he is alleged to have stolen Samsung trade secrets and details about Foxconn’s planned plant.
Choi, detained in jail since late May, denied all charges through his lawyer, Kim Pilsung.
Choi’s Singapore-based consultancy Jin Semiconductor won the contract with Foxconn around August 2018, according to the indictment.
In a matter of months, Choi had poached “a large number” of employees of Samsung and its affiliates and illegally obtained secret information related to the construction of a chip factory from two contractors, prosecutors allege.
Jin Semiconductor illegally used confidential information related to semiconductor cleanroom management obtained from Cho Young-sik, who worked at one of the contractors, Samoo Architects & Engineers, the indictment alleges.
Clean rooms are manufacturing facilities where the enclosed environment is designed to remove dust and other particles that can damage highly sensitive chips. Samoo participated in the 2012 construction of Samsung’s chip plant in Xian, China.
Prosecutors allege that Choi’s company also illegally obtained plans for Samsung’s China plant from Chung Chan-yup, a HanmiGlobal employee, who oversaw the construction and design of the sewage treatment floors and other subsidiary facilities. related to the chip manufacturing process. They have yet to establish how the information about the layout of the floor was obtained, according to the indictment.
Choi’s lawyer strongly rejected the allegations made in the indictment.
“What prosecutors allege was stolen has nothing to do with how to design or manufacture chips. For example, there are international public engineering standards for doing clean rooms and that’s not something only Samsung has,” Kim said.
“A factory layout? You can take a snapshot on Google Maps and the experts will know what’s inside which building,” Kim said, showing a satellite snapshot of Samsung’s plant in Xian, China.
The plant was never built after Foxconn pulled out, according to Choi’s lawyer and a person with direct knowledge of the case.
Samsung Electronics, the world’s largest memory chip maker, declined to comment on the matter, citing ongoing investigations.
In a statement, Foxconn said that while it was “aware of the speculation about the legal case in South Korea,” the company would not comment on the ongoing investigations.
“We comply with the laws and regulations that govern the jurisdictions in which we operate,” Foxconn said.
The indictment does not accuse Foxconn of wrongdoing.
Samoo and HanmiGlobal were also not charged with any crimes in the indictment.
Samoo told Reuters he was not involved in any alleged activity brought forward by prosecutors. He Cho’s former employee was not charged and he could not immediately be reached for comment.
HanmiGlobal also said that the allegation was linked to an individual and that the company was not involved. His employee Chung has been charged by South Korean prosecutors with leaking trade secrets. An attorney for Chung did not immediately respond to requests for comment.
Samsung treats the types of materials Choi obtained as “strictly confidential” and protects them through multiple layers of protection, allowing access only to those who have authorization within the company and its external partners, the indictment says.
Choi, 65, was once seen as a star in the South Korean chip industry. He worked at Samsung for 17 years, where he developed DRAM memory chips and worked on wafer processing technology, winning internal awards for advancing the company’s DRAM technology, before leaving in 2001.
Subsequently, he worked at rival Hynix Semiconductor, now known as SK Hynix, for more than eight years, serving as chief technology officer of its manufacturing and research divisions and helping turn the tide for the loss-making chipmaker.
According to the indictment, Foxconn’s new plant had a planned capacity of 100,000 wafers per month using 20-nanometer DRAM memory chip technology. While years behind Samsung’s latest 12 and 14 nanometer technology, 20 nanometer DRAM is still considered a “national core technology” in South Korea.
The South Korean government prohibits such technologies from being transferred abroad unless through a legally approved license or association.
Lee Jong-hwan, professor of chip engineering at Sangmyung University, said information to create optimal conditions for clean rooms and factory layout was critical to achieving high throughput rates of the chips, which would have helped to China’s national chip manufacturing capabilities.
Lee noted that some data obtained by Choi might turn out to be non-confidential, “but now that China is eager to catch up with South Korean companies…any data related to 10-nanometer, 20-nanometer technology would have been useful.” “. “
Choi signed a preliminary consulting contract around 2018 with Foxconn to potentially build the chip factory in Xian, his lawyer said.
However, Foxconn terminated the contract just a year later and only paid project-related salaries, the lawyer said. He declined to comment on why Foxconn terminated the contract or provide further details, citing the sensitivity of the matter.
The person with direct knowledge of the case said prosecutors found that Foxconn had agreed to provide 8 trillion won ($6 billion) to build the factory, and Foxconn also paid several million dollars to Choi’s company every month until the contract was terminated for reasons undisclosed by the prosecution.
Jin Semiconductor’s financial statement in 2018 said it reached an agreement with “a major customer” for the provision of skilled labor over the next five years. The client paid an advance of $17,994,217 (roughly Rs. 147.4 crore) to the company, according to the statement.
Foxconn, formally called Hon Hai Precision Industry, did not respond to questions from Reuters about payments or deals with Jin Semiconductor or Choi.
Choi’s lawyer said his client may be a scapegoat in a campaign by the South Korean government, caught up in a rivalry between China and the United States, which seeks to slow China’s progress in making chips.
South Korean President Yoon Suk Yeol declared this month that competition from the chip industry is “all-out war.”
“This could be setting an example for the current administration’s agenda, like technology leaks to China,” said Pilsung, Choi’s lawyer.
A prosecution official declined to comment on the suggestion that Choi was a scapegoat.
Choi is charged along with five other former and current Jin Semiconductor employees and a Samsung contractor employee. The trial is scheduled to begin on July 12, court records show.
© Thomson Reuters 2023