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When former Samsung executive Choi Jinseog obtained a contract with Taiwan's Foxconn in 2018, he allegedly used his former employer's supplier network to steal secrets to assist his new client in establishing a chip plant in China, according to a South Korean indictment.
Prosecutors announced the charge on June 12, claiming that the theft cost Samsung Electronics more than $200 million (approximately Rs. 16.3 crore) in damages, based on the projected expenses of developing the stolen data. The announcement did not name Choi and provided very limited data, although other media outlets afterwards recognised Choi and his ties to Foxconn.
The leaked 18-page indictment, which Reuters obtained, describes the case against Choi, including how he is accused of stealing Samsung's trade secrets and information about the proposed Foxconn facility.
Choi, who has been imprisoned since late May, has disputed all accusations through his lawyer, Kim Pilsung.
According to the indictment, Choi's Singapore-based consultant Jin Semiconductor obtained the contract with Foxconn around August 2018.
Prosecutors claim that within months, Choi had poached "a large number" of people from Samsung and its affiliates and fraudulently got sensitive information about developing a chip facility from two contractors.
According to the indictment, Jin Semiconductor illegally utilised secret knowledge about semiconductor cleanroom management received from Cho Young-sik, who worked at one of the contractors, Samoo Architects & Engineers.
Clean rooms are enclosed production facilities designed to eliminate dust and other pollutants that might harm extremely sensitive chips. Samoo worked on the development of Samsung's chip facility in Xian, China, in 2012.
Prosecutors claim Choi's firm also unlawfully got plans of Samsung's China facility from Chung Chan-yup, an employee at HanmiGlobal who oversaw its construction and floor layouts of wastewater treatment and other subsidiary facilities affecting the chip production process. According to the indictment, they have yet to determine how the information on floor layout was obtained.
Choi's counsel vehemently denied the allegations in the indictment.
"What prosecutors claim was stolen has nothing to do with chip design or manufacturing." For example, there are public worldwide technical standards for creating cleanrooms, which are not unique to Samsung," Kim explained.
"A factory floor plan?" "You can take a Google Maps snapshot and experts will know what is inside which building," Kim explained, holding up a satellite image of Samsung's facility in Xian, China.
According to Choi's lawyer and a source with intimate knowledge of the issue, the factory was never built after Foxconn dropped out.
The world's largest memory chipmaker, Samsung Electronics, declined to comment on the topic, citing ongoing investigations.
Foxconn stated in a statement that while it is "aware of speculation surrounding the legal case in South Korea," the business does not comment on current investigations.
"We abide by the laws and regulations that govern the jurisdictions in which we operate," Foxconn stated.
The indictment does not charge Foxconn with any misconduct.
In the indictment, neither Samoo nor HanmiGlobal were accused of any misconduct.
Samoo informed Reuters that it was not involved in any of the allegations made by prosecutors. Its former employee Cho was not charged and could not be reached for comment immediately.
HanmiGlobal further stated that the accusation was made by an individual and that the company had no participation. South Korean authorities have accused its employee Chung with disclosing company secrets. Chung's lawyer did not immediately reply to calls for comment.
SECRETS OF THE TRADE
According to the indictment, Samsung deems the documents Choi collected as "strictly confidential" and preserves them with various levels of protection, limiting access only to those with authorization within the company and its third-party partners.
Choi, 65, was previously seen as a rising star in South Korea's semiconductor sector. He spent 17 years with Samsung developing DRAM memory chips and working on wafer processing technology, collecting internal accolades for enhancing the company's DRAM technology before departing in 2001.
He then spent more than eight years at rival Hynix Semiconductor, now known as SK Hynix, as chief technology officer of its production and research divisions, helping to turn around the loss-making chipmaker.
According to the indictment, the new Foxconn factory was supposed to have a monthly capacity of 100,000 wafers utilising 20-nanometer DRAM memory chip technology. Despite being years behind Samsung's most recent 12- and 14-nanometer technologies, 20-nanometer DRAM is nevertheless regarded as a "national core technology" in South Korea.
The South Korean government forbids the transfer of such technology unless it is done through officially sanctioned licencing or cooperation.
According to Lee Jong-hwan, a chip engineering professor at Sangmyung University, knowledge needed to create ideal cleanroom and factory layout conditions was vital to reaching high chip yield rates, which would have aided China's domestic chipmaking capabilities.
Some of the information gathered by Choi may not be important, according to Lee, 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 helpful."
CHINA CONNECTION
Choi signed a preliminary consulting deal with Foxconn in 2018 to potentially establish the semiconductor facility in Xian, according to his lawyer.
However, Foxconn terminated the contract barely a year later and only paid project-related pay, according to the lawyer. He declined to comment on why Foxconn terminated the deal or to give any information, citing the delicacy of the situation.
According to a person with direct knowledge of the case, prosecutors discovered Foxconn agreed to provide 8 trillion won ($6 billion) to build the factory, and Foxconn also paid Choi's company several million dollars every month until it pulled out of the contract for reasons not disclosed in the indictment.
According to Jin Semiconductor's 2018 financial statement, the company signed into an agreement with "a major customer" for the provision of competent labour for the next five years. According to the statement, the consumer gave the business an advance of $17,994,217 (approximately Rs. 147.4 crore).
Foxconn, previously known as Hon Hai Precision Industry, did not respond to Reuters' inquiries about payments to any agreements with Jin Semiconductor or Choi.
Choi's lawyer stated that his client may be used as a scapegoat in a South Korean government drive to limit China's advancement in chip manufacturing, which is caught in a rivalry between China and the United States.
South Korean President Yoon Suk Yeol termed semiconductor industry competitiveness a "all-out war" earlier this month.
"This might be setting an example for the current administration's agenda, such as technology leaks to China," Pilsung, Choi's counsel, said.
A prosecutor declined to comment on the idea that Choi was used as a scapegoat.
Choi has been indicted alongside five other former and present Jin Semiconductor workers, as well as a Samsung contractor employee. According to court documents, the trial will begin on July 12.