Samsung Trade Secrets Theft, Indictment Reveals Foxconn’s Involvement in China Chip Project

Former Samsung executive Choi Jinseog is facing allegations outlined in a sealed indictment by South Korean prosecutors. The indictment suggests that Choi tapped into his former employer’s supplier network to steal trade secrets, aiding Taiwan’s Foxconn in setting up a chip factory in China.

Prosecutors claim that the theft resulted in damages exceeding $200 million for Samsung Electronics. While Choi’s name was not initially disclosed in the announcement, subsequent media reports identified him and his connection with Foxconn.

The recently revealed indictment by South Korean prosecutors sheds light on a case involving former Samsung executive Choi Jinseog and his alleged plan to steal trade secrets from his former employer to assist Taiwan’s Foxconn in setting up a chip factory in China.

The indictment, which remains sealed, outlines the accusations against Choi and the significant damages caused to Samsung Electronics as a result of the theft, estimated to be over $200 million. While the indictment did not initially name Choi, subsequent media reports have identified him and his connections to Foxconn.

The detailed 18-page indictment provides further insights into the case against Choi, revealing the methods he allegedly employed to pilfer Samsung’s trade secrets and the information pertaining to the planned Foxconn plant.

However, Choi, who has been in jail since late May, vehemently denies all charges through his lawyer, Kim Pilsung.
According to the indictment, Choi’s Singapore-based consultancy, Jin Semiconductor, secured the contract with Foxconn around August 2018. Within a few months, Choi allegedly poached numerous employees from Samsung and its affiliates and illicitly obtained confidential information related to chip factory construction from two contractors.

One of the contractors, Samoo Architects & Engineers, was claimed to have provided Jin Semiconductor with trade secrets regarding semiconductor cleanroom management. Clean rooms are crucial in chip manufacturing as they maintain a controlled environment free from particles that can damage sensitive chips.

The other contractor, HanmiGlobal, was said to have leaked blueprints and floor layouts of Samsung’s China plant, where the chip manufacturing process took place. It remains unclear how HanmiGlobal obtained the floor layout information.

Choi’s lawyer strongly refuted the allegations presented in the indictment. Kim argued that the information supposedly stolen had no direct correlation to chip design or production. He contended that standards for constructing cleanrooms are publicly available, and factory layouts can be discerned from satellite images.

Moreover, it was revealed that the planned Foxconn plant was never built as the company withdrew from the project, according to Choi’s lawyer and a person familiar with the case. Foxconn, in a statement, acknowledged the speculation surrounding the legal case in South Korea but declined to comment further.

While the indictment focuses on Choi and his alleged actions, it does not implicate Foxconn in any wrongdoing. Samsung Electronics, the world’s leading memory chipmaker, declined to comment on the ongoing investigations, citing their sensitive nature.

The contractors involved, Samoo and HanmiGlobal, denied any involvement in the alleged activities outlined by the prosecutors. HanmiGlobal clarified that the accusation was related to an individual employee, and the company itself had no connection to the matter. The employee in question, Chung Chan-yup, has been charged separately with leaking business secrets.

Trade Secrets Of Samsung

The indictment highlights the significance of the trade secrets Choi obtained, emphasizing their strict confidentiality within Samsung. These secrets are safeguarded through multiple layers of protection, with access granted only to authorized personnel within the company and its trusted partners.

Choi, once regarded as a prominent figure in South Korea‘s chip industry, had a lengthy tenure at Samsung, contributing to the development of DRAM memory chips and wafer processing technology. He subsequently joined rival company SK Hynix, where he served as the chief technology officer and played a role in the company’s turnaround.

As outlined in the indictment, the Foxconn project aimed to establish a chip factory with a planned capacity of 100,000 wafers per month using 20-nanometer DRAM memory chip technology. Although this technology lagged behind Samsung’s latest advancements, it was still considered a “national core technology” in South Korea. The country has strict regulations prohibiting the transfer of such technologies overseas without authorized licensing or partnerships.

Lee Jong-hwan, a chip engineering professor, noted that the information Choi obtained, particularly regarding cleanroom conditions and factory layout, was crucial for achieving high yield rates in chip production. This knowledge could have significantly benefitted China’s domestic chipmaking capabilities, especially as the country seeks to catch up with South Korean companies in the semiconductor industry.

China’s Link Found

Choi signed a preliminary consulting contract with Foxconn in 2018 for the chip factory project, which was expected to be located in Xian, China. However, Foxconn terminated the contract after just one year, making payments only related to project salaries. The reasons behind Foxconn’s decision to end the contract remain undisclosed. Prosecutors discovered that Foxconn had initially agreed to provide 8 trillion won ($6 billion) for the factory’s construction and had also been making monthly payments to Choi’s company until the contract’s termination.

Choi’s lawyer suggested that his client may be a scapegoat in the South Korean government’s attempt to curb China’s progress in chip manufacturing amid the ongoing technological rivalry between China and the United States. The indictment charges Choi alongside five other former and current Jin Semiconductor employees and a Samsung contractor employee. The trial is scheduled to begin on July 12, according to court records.

The Last Bit, the sealed indictment against Choi Jinseog sheds light on the allegations of trade secret theft from Samsung Electronics for the benefit of Foxconn’s chip factory project in China. The detailed indictment provides insights into the methods employed, the contractors involved, and the potential damages caused to Samsung. However, with Choi denying all charges and Foxconn not being implicated in any wrongdoing, the trial will further uncover the truth behind these allegations and their implications for the semiconductor industry.

The recently unveiled indictment outlining the purported theft of Samsung’s secrets for Foxconn’s China project highlights the complexities and consequences associated with industrial espionage. The allegations against Choi Jinseog and his alleged involvement in stealing trade secrets reveal the challenges faced by technology companies in safeguarding their proprietary information. As the trial proceeds, the outcome will not only impact the individuals involved but also underscore the significance of protecting intellectual property and maintaining trust within the global supply chain.