Stolen Samsung secrets behind Foxconn's China factory? Yes, says South Korea

Former Samsung executive Choi Jinseog is facing a sealed indictment by South Korean prosecutors, alleging that he stole trade secrets from Samsung’s supplier network to help his new client, Foxconn, set up a chip factory in China.

The indictment, reviewed by Reuters, provides details of the case against Choi and outlines how he allegedly poached employees from Samsung, obtained confidential information, and illegally acquired blueprints of Samsung’s China plant.

Choi, however, denies all the charges. The theft is said to have caused more than $200 million in damages to Samsung Electronics. Foxconn, aware of the legal case, stated that it doesn’t comment on ongoing investigations.

The indictment claims that Choi’s Singapore-based consultancy, Jin Semiconductor, won a contract with Foxconn in 2018 and soon thereafter obtained secret information related to building a chip factory.

Prosecutors allege that Choi’s company illegally used confidential information obtained from two contractors: Cho Young-sik of Samoo Architects & Engineers and Chung Chan-yup, an employee at HanmiGlobal.

Choi’s lawyer, Kim Pilsung, vehemently denies the claims, arguing that the alleged stolen information is not exclusive to Samsung and can be obtained through public engineering standards and satellite images.

Foxconn, one of the world’s largest electronics manufacturers, responded to the allegations by stating that it abides by laws and regulations in the jurisdictions where it operates.

Samsung Electronics, the leading memory chipmaker, declined to comment on the matter, citing ongoing investigations.

Samoo Architects & Engineers and HanmiGlobal distanced themselves from the allegations, with the latter confirming that the accused employee has been charged with leaking business secrets.

The indictment emphasizes that the types of materials obtained by Choi are treated as strictly confidential by Samsung, with multiple layers of protection in place.

Choi, once a prominent figure in South Korea’s chip industry, worked at Samsung for 17 years, where he contributed to the development of DRAM memory chips and wafer processing technology. He then joined rival company SK Hynix, where he played a crucial role in the turnaround of the struggling chipmaker.

According to the indictment, the planned Foxconn plant intended to utilize 20-nanometer DRAM memory chip technology, which, while behind Samsung’s latest technology, is still considered a “national core technology” by South Korea.

The transfer of such technologies overseas is restricted unless approved through licensing or partnerships.

The indictment suggests that the stolen data could have assisted China in catching up with South Korean chipmakers, as China is keen on enhancing its domestic chip manufacturing capabilities.

Choi initially signed a consulting contract with Foxconn in 2018, but the contract was terminated after a year.

The reasons behind the termination and the subsequent withdrawal from the project remain undisclosed.

Prosecutors reportedly found evidence that Foxconn had agreed to provide 8 trillion won ($6 billion) to build the factory and had been making monthly payments of several million dollars to Choi’s company until the contract was ended.

Choi’s lawyer suggests that his client may be a scapegoat in a larger campaign by the South Korean government, caught in the rivalry between China and the United States.

The lawyer speculates that the government is seeking to slow China’s progress in chip manufacturing, aligning with President Yoon Suk Yeol’s declaration of chip industry competition as an “all-out war.”

Choi, along with five other former and current Jin Semiconductor employees and a Samsung contractor employee, is set to go on trial starting on July 12.

The case continues to attract attention due to its potential impact on the competitive landscape of the chip industry and the allegations of technology leaks to China.

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