Former Samsung Executive Denies Stealing Company Data to Build Chip Factory in China

A South Korean chip executive imprisoned over industrial espionage charges rejected allegations he had sought to build a copycat chip factory in China with sensitive information developed by Samsung Electronics.

In a handwritten letter to Reuters, his first comments to the media since he was detained on May 25, Choi Jinseog elaborated on his defense plan and said the allegations against him regarding the Xian plant were not substantiated.

Prosecutors earlier this month indicted the former Samsung executive for illegally obtaining secret information to build a semiconductor plant only 1.5 km (1 mile) from a Samsung factory in Xian, China.

Choi is in custody at a detention center in Suwon, a city south of Seoul where Samsung has its headquarters. He previously denied all the charges through his lawyer.

In the letter, Choi said the factory was planned for Taiwan's Foxconn, for early test production of DRAM memory chips, while Samsung's plant in Xian was designed to manufacture NAND flash memory chips.

Choi said DRAM process technology is more than 30% different from making NAND flash chips because it is more complicated, and some equipment used in manufacturing both chips is also different.

"They use different equipment and the layout of (Samsung's) NAND flash chip equipment is really of no use for us," Choi said in the letter.

Several semiconductor industry experts interviewed by Reuters, who aren't involved in the case, confirmed there are differences in processes and equipment used for NAND and DRAM production, without specifying them precisely.

Samsung declined to comment, citing the ongoing investigations.

Neither Foxconn nor the companies contracted to build the Samsung plant were accused of any wrongdoing.

Foxconn, formally called Hon Hai Precision Industry Co Ltd, referred Reuters to earlier comments where it said it was "aware of speculation" around the case but doesn't comment on ongoing investigations.

"We abide by laws and regulations governing jurisdictions we operate in," Foxconn said.

SECRET DATA

According to an unreleased 18-page indictment, reported earlier by Reuters, prosecutors allege Choi planned to build a DRAM factory in Xian for Foxconn and illegally used secret data his company's employees obtained from workers of two Samsung contractors.

A NAND flash chip is a storage chip that retains data even when a device is turned off, unlike a DRAM chip which loses data when the power is off. Both are used in smartphones, computers, and many other electronic devices.

Prosecutors claim Choi poached "a large number" of employees from Samsung and its affiliates and pressured several employees to obtain secret information involving the management of special semiconductor "clean rooms", plus factory blueprints and layouts, to shorten construction time for the planned China factory.

Choi's lawyer, Kim Pilsung, says this information is non-sensitive data easily accessible to those in the chip supply chain. Prosecutors argue they are "core national technology" protected by law and their theft caused more than $200 million in damages to Samsung.

NOT XIAN

Choi sent the letter to Reuters via his adviser who recently visited him. The adviser, also a close friend, requested anonymity due to the sensitivity of the matter.

Choi confirmed the letter was genuine, according to Roh Hwa-wook, another long-time friend of Choi, who visited him on Thursday.

In his letter, Choi said his plan was to build a research and development chip line and he didn't need to copy Samsung's chip facilities designed for mass production.

The plant, known as a fab, was never built after Foxconn pulled out, Choi and his lawyer said.

"What we were planning to build was a R&D fab and there is no R&D fab at (Samsung's) Xian plant. When there is no R&D fab to copy, there is no reason to copy," Choi said.

Prosecutors declined to comment on the content of Choi's letter ahead of his trial scheduled for July 12. They have said the focus of the case is illegal acquisition and use of sensitive information, which Choi denies.

Choi also rejected the claim by prosecutors that it was Xian where he wanted to build the alleged copycat factory, saying the plan was to build a plant in Qingdao after weighing several cities including Xian.

Neither the Qingdao or Xian city governments responded to Reuters' request for comment.

Choi's lawyer Kim said he plans to seek bail, citing Choi's health condition after he underwent a heart procedure earlier this year.

Choi's adviser said the accused felt "cornered" and "distraught" by the industrial espionage charges, which are viewed by several chip industry experts interviewed by Reuters as part of South Korea's efforts to slow China's progress in chip manufacturing. 

© Thomson Reuters 2023