For one Chinese semiconductor executive, the easiest way to recruit South Korean engineers is to hang out outside factory gates.
“I just go to the fabs of foreign companies and stand at the gate, asking them to come to our own production lines to do some temporary work and earn some extra money,” said the executive, who was not named wanted, told the Financial Times.
“The ones I visit more often are the fabs of TSMC, Samsung and SK Hynix, as well as the office buildings of foreign equipment suppliers,” the director added. “Their commute time is relatively fixed, and engineers have free time to help after they get off work.”
The executive’s willingness to engage in unorthodox hiring practices illustrates an intensifying campaign by Chinese companies to gather South Korean expertise in critical technologies ranging from semiconductors to batteries for electric vehicles and industries including displays and shipbuilding.
Yeo Han-koo, who served as Seoul’s trade minister until May 2021, said efforts to acquire South Korean technology have become more aggressive as Beijing tries to mitigate the damage from Washington’s own moves to Limiting Chinese access to American technology and expertise.
“The tightening of US controls on China led Chinese companies to escalate their charm offensive against Korean engineers and researchers, using both legal and illegal means,” Yeo said.
A headhunter for Chinese foundries told the FT: “Under the new sanctions imposed by the US, it has become very difficult to recruit people who are educated or employed in the US. So alternative sources of talent are Europe, Japan and South -Korea words.
Experts note that what is described in South Korea as “tech leakage” may involve the perfectly legal hiring of foreign talent. South Korea itself has spent many decades gathering industrial know-how from Western and Japanese companies as it transformed from developing country to technological powerhouse.
But there are also illegal hiring practices, patent infringement, espionage and theft. According to South Korea’s National Intelligence Service, the number of confirmed leaks of “national nuclear technologies” has steadily increased from three cases in 2017 to five each in 2018 and 2019, to nine in 2020 and 10 in 2021.
Figures released this month by the NIS show there were three leaks of national core technologies in the first quarter of 2023, with one each from the semiconductor, display and car manufacturing sectors. All three came from large companies.
Seoul is taking the problem so seriously that it is creating a database of chip engineers working for South Korean companies to monitor their travel in and out of the country.
The government has also established several new investigative bodies to combat the leaks, passed legislation to lift penalties and make it easier to report suspected violations.
Those measures seem to be bearing fruit: there were twice as many arrests related to tech leakage in the first quarter of 2023 as in the same period last year.
But Hong Seok-joon, a lawmaker from South Korea’s ruling conservative People Power party, said even tougher rules and penalties were still required.
“The number of cases of technical leaks is increasing, but the punishment for perpetrators remains weak and we still lack measures to prevent them,” said Hong. “Only about 6 percent of the suspects accused of engineering leakage (in South Korea) are convicted because it is so hard to prove.”
Ben Forney, a researcher at Seoul National University who specializes in industrial espionage issues, said the majority of cases involved South Korean engineers, especially retired ones, being hired by Chinese companies at salaries three or four times higher than who they were before.
In some cases, South Korean rules requiring engineers not to join a foreign rival within two years of leaving their employment were circumvented by the creation of seemingly unrelated “paper companies” in South Korea or Taiwan that’ t the engineers would pay handsomely until they could be officially recruited.
“In the US, the most common way for China to get expertise is to lure or coerce Chinese engineers who are based in the US,” Forney said. “But in Korea, the problem is domestic engineers going abroad. That’s why it tends to be described here as ‘leakage’ rather than espionage or theft.
The pressure on South Korean companies is particularly acute in the semiconductor industry.
In February, seven people, including former employees of SEMES, a subsidiary of Samsung Electronics specializing in the production of wafer cleaning equipment, were jailed for transferring stolen technologies to a Chinese company.
“Several employees left the company to set up their own and leaked the technologies to China through a Chinese broker,” said Lee Dong-hwan, who served as a state investigator in the SEMES case and now works as a patent attorney at WeFocus. a Seoul-based patent law firm.
“The parts of the wafer cleaning equipment were exported to the Chinese company, which assembled the parts on the advice of the defendants and sold the wafer cleaning equipment to other Chinese chipmaking plants.”
Lim Hyeong-joo, a partner at law firm Yulchon in Seoul, said Chinese companies are also keen to acquire South Korean cathode technology for the production of high-density nickel-rich batteries.
Nor are the South Koreans alone concerned about tech leakage to China.
“There is concern that the US may take our technology because its Chips Act allows the US to inspect our companies’ plants if necessary for their safety,” said People Power’s Hong.
Authorities in Seoul have given “unofficial guidance” to South Korean battery companies with joint ventures in the US, asking them “to allow only Korean personnel to deal with major technologies in the JV plants,” said Lee Seok- hi from law firm Kim & Chang.
“The Koreans are not just going to hand over their technologies to the U.S.,” Forney said. “At the same time, the more the tech ecosystems of the two countries become intertwined, the more Korean vulnerabilities also become American vulnerabilities.”
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