Chinese Theft of Trade Secrets

America’s overt payback for China’s covert espionage
By David Ignatius

Chinese dictator Xi Jinping in Beijing on Nov. 2. 

While the U.S.-China trade war has been getting the headlines, U.S. intelligence and law enforcement agencies have been waging a quieter battle to combat Chinese theft of trade secrets from American companies — a practice so widespread that even boosters of trade with China regard it as egregious.
The Trump administration’s campaign of tariffs will eventually produce some version of a truce.
But the battle against Beijing’s economic espionage is still accelerating, and it may prove more important over time in leveling the playing field between the two countries.
To combat Chinese spying and hacking, U.S. intelligence agencies are increasingly sharing with the Justice Department revelatory information about Chinese operations.
That has led to a string of recent indictments and, in one case, the arrest abroad of a Chinese spy and his extradition to the United States to face trial.
The indictments don’t just charge violations of law; they also expose details of Chinese spycraft.
And there’s a hidden threat: The Chinese must consider whether the United States has blown the covers of not just the people and organizations named in the criminal charges but also others with whom they came in contact.
This law enforcement approach to counterespionage requires public disclosure of sensitive information, something that intelligence agencies often resist.
But it seems to be an emerging U.S. strategy.
The Justice Department has pursued a similar open assault on Russian cyberespionage, with three recent indictments naming a score of Russian operatives and disclosing their hacking techniques, malware tools and planned targets.
China, like Russia, is displaying an increasingly freewheeling and entrepreneurial approach to espionage. 
Several indictments unsealed since September reveal how the Ministry of State Security, the Chinese spy service, has operated through its regional bureaus — in this case the Jiangsu provincial office of the MSS — to obtain precious U.S. technology.
The indictments allege that from 2010 to 2015, the Jiangsu branch ran a team of nine hackers who tried to steal U.S. techniques for making jet engines. 
This is a subtle and highly valuable aspect of aerospace technology, one of the few that China hasn’t yet mastered or stolen, and the Chinese evidently wanted to obtain by stealth what they couldn’t produce on their own.
“The concerted effort to steal, rather than simply purchase, commercially available products should offend every company that invests talent, energy and shareholder money into the development of products,” said Adam Braverman, the U.S. attorney in San Diego who helped prosecute the cases.
The San Diego indictment lists the hacker names used by the conspirators, handles such as “Cobain,” “sxpdlcl” and “mer4en7y.”

Yanjun Xu, who also uses the names Qu Hui and Zhang Hui, was extradited to the US with help from Belgian authorities for seeking to steal trade secrets and other sensitive information from GE Aviation, an American company that leads the way in aerospace.

A separate indictment charged an MSS officer named Yanjun Xu, a deputy division director in the Jiangsu bureau, with trying to steal jet engine secrets from GE Aviation; Xu was arrested in April in Belgium after he began trying to penetrate the company’s operations, and he was extradited to the United States last month.

Ji Chaoqun: US army reservist accused of trying to recruit Chinese spies

The United States in September arrested a U.S. Army reservist named Ji Chaoqun and charged that he had helped the Chinese gain information about aerospace industry targets.
This month, the Justice Department also unsealed a September indictment that accused a Chinese company and its Taiwanese partner, both funded by the Chinese government, of trying to steal eight trade secrets for a memory-chip technology known as DRAM from Micron Technology Inc., based in Silicon Valley.
The indictment notes that the Chinese government had identified DRAM as “a national economic priority” that Beijing was determined to obtain.
The indictment, brought by the U.S. attorney in San Jose, uses blunt language to describe the plot: “In order to develop DRAM technology and production capabilities without investing years of research and development and the expenditure of many millions of dollars,” the defendants “conspired to circumvent Micron’s restrictions on its proprietary technology.”
What gives these indictments extra bite is that Xi Jinping had promised back in 2015 that China wouldn’t conduct economic cyberespionage anymore.
That pledge followed an indictment the previous year that revealed an elaborate plot by Chinese military hackers to steal U.S. commercial secrets.
But in the espionage world, promises not to spy are dubious at best. 

Jerry Chun Shing Lee: ex-CIA officer at the centre of one of the largest US intelligence breaches in decades.

Over the past three years, the Justice Department has charged former CIA officer Jerry Chun Shing Lee and five other Americans with stealing secrets on behalf of Beijing.
As a rising power, China is also a rising threat in the intelligence sphere.
The U.S. counterattack, in part, seems to be a public revelation of just how and why Beijing is stealing America’s secrets — overt payback for covert espionage.

Chinese Firm, Taiwanese Partner Steals Trade Secrets From Micron

Indictment is announced alongside wide-ranging initiative to combat Chinese theft of critical U.S. technology
By Aruna Viswanatha, Kate O’Keeffe and Dustin Volz

The indictment, unsealed Thursday, is the latest in a flurry of charges targeting massive Chinese technology theft.

The Justice Department unsealed charges Thursday against a Chinese state-owned firm and its "Taiwan partner" for stealing trade secrets from the U.S.’s largest memory-chip maker, Micron Technology Inc.
The indictment, announced alongside a wide-ranging U.S. initiative to combat Chinese national security threats, is the latest in a flurry of charges targeting Chinese technology theft.
The case, which follows related criminal charges filed by Taiwanese authorities last year, charges United Microelectronics Corp. , a Taiwan semiconductor foundry that is publicly traded on the New York Stock Exchange; Chinese state-owned Fujian Jinhua Integrated Circuit Co.; and three Taiwan nationals.
Attorney General Jeff Sessions also condemned China for clear violations of an accord reached with the Obama administration under which both governments agreed not to support cyberattacks to steal corporate secrets from one another.
“In 2015, China committed publicly that it would not target American companies for economic gain,” Mr. Sessions said. 

“Obviously, that commitment has not been kept.”
According to the indictment, one of the defendants was a former Micron employee in Taiwan who moved to UMC in 2015 and recruited the two other individuals who were charged to join him and bring Micron’s trade secrets with them. 

The ringleader arranged for UMC to partner with Jinhua, where he then went to work, to develop the same technology, the indictment says.
Representatives for Jinhua and the Chinese Embassy in Washington, D.C., didn’t immediately provide comment. 

A lawyer for UMC declined to comment. 

The individuals, who are not in U.S. custody and believed to be overseas, couldn't be located for comment.
Micron praised the indictments in a statement, saying it has invested billions of dollars over decades to develop its intellectual property.
The unsealing of the indictment, obtained in September and made public Thursday, comes just days after the Commerce Department dealt a potentially fatal blow to Jinhua by barring exports and transfers of U.S.-origin technology to the firm, which depends on the technology to produce its own chips. 

Jinhua, a startup backed by $5.7 billion in state funds, is a key part of China’s plan to build a world-class semiconductor industry and wean itself off a dependence on foreign technology.
The Justice Department also filed a civil action to prevent UMC and Jinhua from exporting the allegedly stolen technology to the U.S. to compete with U.S. chip firms. 

“We are not just reacting to the crimes... We are acting to block the defendants from doing more harm to our United States-based company, Micron,” Mr. Sessions said.

Also on Thursday, Mr. Sessions announced a new “China initiative” to better combat theft of trade secrets, bribery, illegal Chinese lobbying and business deals that could give Chinese investors access to critical U.S. technology.
Mr. Sessions said that as part of the initiative, a new working group of Justice Department officials, including the top federal prosecutors from districts in California, Texas and other states, would increase law-enforcement engagement with U.S. universities, where the Justice Department believes Chinese Communist party initiatives target technology and threaten academic freedom.
U.S. officials have stepped up pressure on Beijing over what they describe as a wide-ranging campaign to improperly obtain critical U.S. technology. 

Earlier this week, federal prosecutors unsealed charges against two Chinese intelligence officers and eight others who worked with them on a yearslong campaign to steal information about a commercial aircraft engine being developed by a U.S. and a French firm.
“Taken together, these cases, and many others like them, paint a grim picture of a country bent on stealing its way up the ladder of economic development, and doing so at American expense,” said John Demers, who heads the Justice Department’s national security division.
With a mix of cyberattacks and on-the-ground recruiting, Beijing’s corporate raiding costs the U.S. economy hundreds of billions of dollars annually.

FBI officials say the agency has active economic espionage investigations leading back to China in all 56 FBI field offices that span nearly every industry and sector.
On Thursday, the FBI’s deputy director David Bowdich said China poses one of the “broadest, most complicated and longest-term threats we face,” and highlighted company insiders, students, and academics who share research results with people not authorized to receive them as the types of spies the FBI is concerned about.
The administration’s renewed focus on rooting out Chinese spies in the scientific community has caused concern among Sino-American suspects.

The sharp rhetoric from senior Justice Department officials contrasted with Trump’s description of a “long and very good call” earlier Thursday with Chinese dictator Xi Jinping, on topics including trade and North Korea.
The Justice Department action against UMC and Jinhua comes after Micron in December sued the companies in a federal court in California, alleging they stole its talent and trade secrets. 

Jinhua contests the claim and the case is continuing.
Jinhua then sued Micron in January in a court in China’s Fujian province—whose government partly controls Jinhua—and won a temporary order blocking Micron units from selling products in China on which each company claims patents. 

Micron has said Jinhua’s suit was a bogus retaliation measure and has criticized Beijing over its treatment.
Among the files pilfered from Micron are hundreds of pages of documents and large Microsoft Excel spreadsheets containing precise design specifications for the architecture of various dynamic random access memory, or DRAM, products. 

Micron is the only U.S.-based company to manufacture DRAM devices, and the value of the stolen intellectual property was at least $400 million and as high as $8.75 billion, according to the indictment.
Thursday’s allegations also added to a growing consensus that China is in violation of the 2015 bilateral pact between Xi Jinping and then-President Obama on cybertheft. 

Officials said that even if the Micron case wasn’t itself a cyber matter, it involved insiders stealing information with the help of cybertools.
U.S. intelligence officials and several private-sector cybersecurity firms believe the accord led to a light decline in Chinese corporate espionage through hacking, but that the malicious activity has returned since Mr. Trump took office as hostilities over trade and other issues have escalated.
Idaho-based Micron, valued at about $100 billion, owns a 20% to 25% share of the dynamic random access memory industry, a computer technology the Chinese didn’t possess until very recently, Mr. Sessions said.

How China Systematically Pries Technology From U.S. Companies

Beijing leans on an array of levers to extract intellectual property coercively

By Lingling Wei in Beijing and Bob Davis in Washington

When China set out to build the C919 jet, it made clear it would buy components only from joint ventures whose foreign partners would share technology. 

DuPont Co. suspected its onetime partner in China was getting hold of its prized chemical technology, and spent more than a year fighting in arbitration trying to make it stop.
Then, 20 investigators from China’s antitrust authority showed up.
For four days this past December, they fanned out through DuPont’s Shanghai offices, demanding passwords to the company’s world-wide research network, say people briefed on the raid. Investigators printed documents, seized computers and intimidated employees, accompanying some to the bathroom.
Beijing leans on an array of levers to pry technology from American companies—sometimes coercively so, say businesses and the U.S. government.
Interviews with dozens of corporate and government officials on both sides of the Pacific, and a review of regulatory and other documents, reveal how systemic and methodical Beijing’s extraction of technology has become—and how unfair Chinese officials consider the complaints.
China’s tactics, these interviews and documents show, include pressuring U.S. partners in joint ventures to relinquish technology, using local courts to invalidate American firms’ patents and licensing arrangements, dispatching antitrust and other investigators, and filling regulatory panels with experts who may pass trade secrets to Chinese competitors.
In DuPont’s case, the dispute concerned a process to produce supple textile fibers from corn, a $400 million business for the company in 2017. 

The antitrust investigators, say the people briefed on the raid, told DuPont to drop the case against its former Chinese partner.
U.S. companies have long complained that Beijing pressures them to hand over intellectual property. More recently, their concerns have escalated as China turns into an advanced rival in industries ranging from chemicals to computer chips to electric vehicles.
Coerced technology transfer is now a central part of the spiraling U.S.-China trade fight, a standoff that appears to be only more entrenched. 

The White House estimates China inflicts $50 billion yearly in damages on U.S. companies. 

That transfer weakens American businesses’ competitiveness and undermines the incentive to innovate.

Coerced technology transfer is part of the spiraling U.S.-China trade war.

Chinese authorities referred questions to a paper issued on Monday by the State Council, China’s cabinet, that says: “Foreign companies are allowed to access China’s markets but they would need to contribute something in return: their technology.”

U.S. companies have gone into China with eyes wide open, for the most part, and many are wary of going public with complaints. 

American companies initially brought the idea of joint ventures to China as a way to get access to a market of 1.4 billion people and tap a low-cost workforce. 

The bargain included helping Chinese firms become more technologically advanced.
At a January U.S. Chamber of Commerce dinner in Washington, executives pressed U.S. Ambassador to China Terry Branstad not to hit Beijing too hard on technology issues, according to dinner attendees. 

China has many ways to get even, warned Christopher Padilla, a vice president of International Business Machines Corp., which licenses technology to Chinese firms.
“If someone gets knifed in a dark alley, you don’t know who did it until the next morning,” Mr. Padilla said at the dinner. 

“But there has been a murder.”
DuPont briefed U.S. officials on its problems but didn’t want its case raised in trade talks, say some of the people familiar with the case. 

Its former Chinese partner, Zhangjiagang Glory Chemical Industry Co., continues to sell chemicals used to make fibers that DuPont believes are knockoffs of its technology. 

DuPont and Glory declined to make executives available for comment.
China’s antitrust regulator said “the investigation is still ongoing,” declining to elaborate.

‘Notable pressure’
About one in five members of the American Chamber of Commerce in Shanghai say they have been pressured to transfer technology, according to a survey conducted in the spring. 

Of those companies, 44% in aerospace and 41% in chemicals report “notable pressure.” 

China considers both industries strategically important.
Trading market access for technology dates to Chinese leader Deng Xiaoping’s effort to launch the pro-market policies that propelled China’s rise. 

General Motors Co. executives on an exploratory 1978 visit proposed a joint venture with a local company to boost a then-antiquated Chinese industry, say Chinese government advisers, historians and auto-industry executives.
The idea fit with Deng’s desire to obtain Western technology but limit Western influence. 

China “needs to give up portions of the domestic market in exchange for advanced technologies we need,” he pronounced in 1984. 

The policy was a success, according to a March 2018 paper by economists at the universities of Colorado, Hong Kong and Nottingham, who found that foreign technology “diffuses beyond the confines of the joint venture” and boosts competitors’ technology.
Foreigners bring cash, technology, management know-how and other intellectual property while the Chinese partner usually contributes some land-use rights, financing, political connections and market know-how. 

As the practice increased, one U.S. administration after another, with only modest success, pressed Beijing to ease requirements that U.S. companies fork over technology. 

The Trump administration says it wants to “change the paradigm” by hitting Beijing with tariffs.
China mandates that foreign companies wanting to open or expand in 35 sectors do it through joint ventures, though it announced a plan in April to phase out rules requiring foreign auto makers to share factory ownership and profits with Chinese companies by 2022.
The arrangement has worked for some. 

When China set out to build its first large commercial passenger jet in 2008, state-owned Commercial Aircraft Corp. of China made clear it would buy components only from joint ventures whose foreign partners would share technology. 

General Electric Co. agreed.
GE’s venture with state-owned Aviation Industry Corp. of China now is a main supplier of avionics for the domestic C919 aircraft. 

The joint venture helped GE avoid writing down a struggling avionics unit, according to former and current GE employees.
GE says “there was never a write down at our avionics business, nor was there risk of one.” 

It says, referring to intellectual property, that GE is “highly sensitive to the protection of our IP whether in our wholly-owned operations or in our” joint ventures.
Advanced Micro Devices Inc., a Silicon Valley chip company, entered a joint venture in 2016 with Chinese private and state-owned entities, including the government’s Chinese Academy of Sciences. AMD licenses microprocessor technology to the venture and is developing new computer chips with it.
AMD has received about $140 million in licensing through 2017, enough to help boost it into the black last year for the first time since 2011. 

“We created a joint venture that was very much a win-win,” AMD Chief Executive Lisa Su said at a 2016 conference. 

An AMD spokesman says the joint venture is “part of our strategy to create a complementary product offering.”
Chinese leaders see innovative technologies as forces to propel its industries up the value chain into more sophisticated sectors and the country into rich-nation ranks. 

To ensure foreigners bring their best, phalanxes of regulatory panels scrutinize foreign investments to make sure they meet government goals.
Huntsman Corp. has singled out these review panels as a conduit for siphoning trade secrets. 

The Woodlands, Texas, chemicals maker is thriving in China, which accounted for about 14% of its 2017 revenues.
Still, “our competition isn’t going to be standing on the sidelines cheering a song,” CEO Peter Huntsman told analysts in June. 

They could be “trying to either steal the technology or develop the technology themselves.” 

Mr. Huntsman declined to be interviewed.
Regulatory panels, packed with industry experts, must approve many chemicals before they can be produced in China and require detailed information on formulas and production processes, say U.S. trade groups and chemical firms. 

“Enough information to duplicate the product,” is how the American Chemical Council trade group put it in a filing to the U.S. government.
For Huntsman, these panels have drilled down on specialized knowledge, such as how it makes plastics with high transparency and elasticity—the kind of material often used for making sports shoes—people close to Huntsman say. 

Soon after those experts conducted their evaluations, local competitors used the same kind of technology in their own products, they say.
Huntsman is battling over a crown jewel of its business, a black dye used in textiles that is less polluting to make. 

It filed a lawsuit in Shanghai against a Chinese company for infringing a patent on the dye in 2007. Huntsman then found a court-appointed review panel stacked against it, it said in a 2011 complaint it filed with the U.S. Commerce Department.
The three-panel members included an engineer from the company Huntsman was suing, another from a local dye-research group and a third who once worked at a local dye firm, according to the complaint and people with knowledge of the matter. 

The experts’ work “effectively turned them into allies and ‘spokespersons’ ” for the Chinese competitor, the complaint said.
Litigation of the patent-infringement case has dragged on. 

Huntsman has asked the Trump administration to consider blocking Chinese firms if they set up operations in the U.S. using disputed Huntsman technology.
For foreign auto makers, the review panels have become a battleground over electric-vehicle technology. 

New vehicles must get government approval before mass production, undergoing a mandatory technology audit that usually lasts several days, foreign makers say.

An electric-vehicle manufacturing line in China. 

An audit this year convinced an employee at one foreign auto maker there was “clear evidence of collusion” between the audit team and Chinese auto makers. 

When the audit began, the person says, inspectors asked for only the blueprints of the electric-vehicle components the foreign company was striving to protect from its Chinese joint-venture partner.
“Somehow they knew exactly the areas to look at,” the person says. 

“There wasn’t a single question about any of the other very complex systems on the vehicle.”

The DuPont raid
DuPont also shared information with its Chinese partner, Zhangjiagang Glory, when it licensed the Chinese firm in 2006 to produce and distribute Sorona, the textile polymers made from corn. 

Within DuPont, the Glory deal was called a “tolling” partnership—a relationship that serves as a kind of toll to enter the market. 

DuPont trained Glory to set up a factory to produce Sorona polymers and to spin them into fibers.
Around 2013, say the people familiar with the case, DuPont didn’t renew Glory’s license amid suspicions the Chinese firm was ripping off its intellectual property to sell products similar to Sorona, which has grown to a $70 million business in China. 

DuPont filed two arbitration cases in China, alleging patent infringement, with hearings stretching through 2017.
Around that time, officials with the National Development and Reform Commission’s antitrust division in Beijing took an interest in the matter and started holding meetings with DuPont. 

The commission showed little interest in DuPont’s planned merger with Dow Chemical Co., completed late last year, even though it launched an antitrust investigation into the combined entity in December.
Rather, investigators focused on the DuPont-Glory standoff, say the people briefed on the case. During three days of meetings in December, DuPont became worried about a raid on its office. 

It planned an employee-training session on how to deal with one, but the investigators showed up first.
An investigator told DuPont officials they were looking at antitrust behavior, specifically their unwillingness to license technology to Chinese firms and their pursuit of the Glory case, say these people. 

DuPont officials, they say, now fear that even dropping the case won’t be sufficient to satisfy Beijing, which may want a hostage in the trade fight with Washington.
Trump administration officials see cases like this as evidence of China’s economic aggression. 

“The combination of naiveté and hubris on the part of U.S. companies seeking to enter the Chinese market, coupled with a sophisticated Chinese effort to extract technology has been a lethal combination,” says White House trade adviser Peter Navarro.

Micron Technology chips. 

During August trade talks, U.S. negotiators pressed Beijing about coerced technology transfer. 

They cited memory-chip maker Micron Technology Inc., which filed a lawsuit in U.S. District Court in California in December alleging technology theft by Fujian Jinhua Integrated Circuit Co. 

Jinhua sued Micron in January in a court in Fujian province—whose government partly controls Jinhua—and won a temporary order blocking some Micron subsidiaries from selling products in China that each company claims patents to.
Jinhua declined to comment. 

In a July statement, it said Micron has “recklessly” infringed on its patents. 

Micron says it intends “to vigorously protect our intellectual property and business interests through all available means.”

Taiwan’s Technology Secrets Come Under Assault From China

Trying to break into semiconductor markets, mainland companies are accused of poaching employees and stealing data
By Chuin-Wei Yap

Micron Technology Inc. chips.

HSINCHU, Taiwan—In late 2016, an engineer at Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip manufacturer, received a call from a Chinese rival company asking if he would be interested in a job as chief engineer to advance work on chips used in mobile phones and game consoles.
The offer was notable, according to a court in Taiwan, because the engineer had no expertise in that type of chip.
What he did have was access to records.
Over a two-week period, he illegally downloaded, printed, then photocopied—using a company copier—reams of TSMC’s trade secrets he planned to send to the Chinese rival, state-owned Shanghai Huali Microelectronics Corp., according to the Taiwanese court.
The engineer, Hsu Chih-Peng was intercepted in a TSMC probe days before he was to start his new job, said the court, which in November handed Hsu a suspended 18-month prison sentence on charges of stealing company secrets.
Huali didn’t respond to requests for comment, and Hsu’s attorney declined to comment on the case.

A Micron Technology facility in Taoyuan City, northern Taiwan. 

Taiwan, a self-governed island that makes two-thirds of the world’s semiconductors, is ground zero in a covert war for the technology that increasingly powers the modern global economy.
Taiwanese government officials and company executives say China is deliberately targeting Taiwan, whose manufacturers make chips for the biggest American companies, including Apple Inc., Nvidia Corp. and Qualcomm Inc.
They say China aims both to pressure what it considers a breakaway province and to pursue its own strategic goal of reducing its reliance on foreign suppliers.
Technology-theft cases more than doubled to 21 last year from eight in 2013, according to official data. 
Taiwanese authorities and attorneys say they mostly haven’t indicted Chinese entities believed to be the ultimate beneficiaries, often for political reasons and because they don’t believe they would be able to enforce court judgments on the mainland.
While China manufactures most of the world’s smartphones and computers, it imports almost all the semiconductors needed to provide the logic and memory that run the gadgets.
Last year, China paid $260 billion importing chips—60% more than it spent on oil. 
Chinese leaders want homemade chips to account for 40% of locally produced smartphones by 2025, more than quadruple current levels.
Beijing has $150 billion in funds to develop its own chip industry, frustrated by Washington blocking Chinese takeovers of American manufacturers and efforts to limit investments and exports to prevent the transfer of technology.
Last week, Mr. Trump backed away from a plan to create tough new restrictions on U.S. technology exports to China as officials try to diffuse a looming war over tariffs.
Beijing is using its largess to try to lure businesses and engineers across the Taiwan Strait, sometimes dangling fivefold salary increases, and sometimes enticing recruits to bring design blueprints with them, Taiwanese officials say.
“China’s poaching is getting more and more serious,” said Lin Wei-cheng, of the island’s Ministry of Justice Investigation Bureau.
“We are after all the same race, and there’s the geographic proximity and ease of communication. And we have the expertise.”
A Wall Street Journal study of 10 recent technology-related prosecution cases in Taiwan found that in nine of those, prosecutors allege the technology ended up with or was intended for companies in China.
China’s technology ministry has in public statements said Taiwan and China should cooperate in high-tech sectors including semiconductors.
It didn’t reply to requests for comment on the Taiwanese cases.
One case involved a Taiwanese unit of Idaho-based Micron Technology Inc., America’s largest memory-chip manufacturer. 
On a spring day in 2016, a 41-year-old engineer for the unit opened his company laptop and, according to Taiwanese prosecutors, tapped into Google search: “clear computer use records.”
Wang Yongming found a file-erasing program called CCleaner, which he used to try to delete traces of more than 900 files from his laptop before returning it to his employer, the prosecutors say.
Ten months after Wang returned the laptop to the company and left for a job with a smaller Taiwanese rival, United Microelectronics Corp., Taiwanese authorities say they unearthed evidence of the documents, which detailed production-design secrets of Micron’s memory chips.
In August, Wang and others were indicted in Taiwan on charges of stealing Micron’s trade secrets for illegal use in China.
Prosecutors allege Wang transferred the data to his new employer, which used the designs in service of a Chinese chip maker called Fujian Jinhua Integrated Circuit Co. 
Jinhua is now planning to mass produce its own version of the chips.
In Wang’s case, prosecutors say he has confessed to some charges.
Wang couldn’t be reached, and his attorneys declined to comment.
UMC declined to comment.
Micron, in a separate lawsuit in California, alleges Jinhua masterminded the plan to take a shortcut through a thicket of knowledge Micron accumulated during decades of investment.
Jinhua didn’t respond to multiple messages seeking comment.
Jinhua has denied the charges in public statements, countersued Micron, and said the accusations are part of an effort by “international oligopolists” to block progress by Chinese companies.
In another case, Taiwanese prosecutors in December charged a 46-year-old former employee at Nanya Technology Corp., the world’s fourth-largest memory-chip supplier, with stealing dynamic random access memory, or DRAM, technology while taking online courses provided by the company. Prosecutors say the man used his smartphone to take snapshots of Nanya’s secrets and used them to seek a job with a Chinese producer backed by Tsinghua Unigroup Ltd., China’s largest state-owned chip maker.

A high-tech expo in Beijing last month highlighted China’s semiconductor ambitions. 

Allegations of espionage by Chinese companies aren’t new.
A Chinese professor is awaiting trial in California federal court for stealing cellphone chip technology from two American companies between 2006 and 2011.
TSMC waged court battles in California over proprietary secrets stolen by Chinese rival Semiconductor Manufacturing International Corp.
SMIC disputed but settled the charges.
Attorneys say current cases in Taiwan appear more aggressive and come amid rising political discord between China and Taiwan, which split from the mainland in a civil war seven decades ago and opposes China’s claim to sovereignty over the island.
Beijing’s pursuit of semiconductor secrets is seen as part of its longstanding goal to reabsorb Taiwan under the mainland government.
Its latest salvo, issued in February, is called “31 Measures” and offers a raft of incentives to attract more Taiwanese businesses and highly educated people to study, invest and establish startups in China.
Taiwan’s Vice Premier Shih Jun-ji has called the policy politically motivated, and Taiwan’s leadership has countered by stepping up funding for researchers and business innovation.
Chips underpin Taiwan’s economy almost as much as oil does Saudi Arabia’s.
Semiconductors account for nearly a fifth of the island’s gross domestic product and are by far its largest export, totaling $92 billion last year.
“China is trying very hard to catch up. Over time, it’s a very serious threat to Taiwan’s economy,” said Christopher Neumeyer, an attorney specializing in intellectual property for Taipei-based Duane Morris & Selvam.
The industry has physically reshaped Taiwan.
The sprawling farmland and dusty shophouses of Taichung’s less-developed southern fringe—where Wang lives—give way toward the city’s north to immaculate grass verges and trimmed roads leading to gleaming glass and steel edifices, home to chip giants including Micron and Taiwan’s Siliconware Precision Industries Ltd.
That growth is now leavened with anxiety.
Though there are few external signs of enhanced security beyond guards assiduously checking visitor identification, companies here say they have stepped up internal measures since they began to sense China’s rising interest in their trade secrets.
After Wang’s theft, Micron’s Taiwan unit beefed up policies to bar cameras from areas where chips are assembled and information exchanged, block downloads outside its network, and disable ports for USB drives.
Micron felt it “should have gotten some of the more stringent policies in place faster that would have avoided this,” a person familiar with the matter said.
Wang took advantage of a lapse in security during an office move to transfer the files, the person said.
In all, Micron lost 200 engineers in 2016 and 2017 to firms supplying Chinese rivals.
Wang was one of 50 who jumped to UMC after Stephen Chen, former president at Micron Memory Taiwan, made the switch in July 2015.
Chen, who joined Jinhua as president in February 2017—days after investigators raided UMC offices, didn’t respond to requests for comment.
Around the time Wang left Micron Taiwan, in April 2016, the company conducted an internal investigation based on suspicions that he had made illegal copies of documents.
When investigators raided UMC in February 2017, say Taiwanese prosecutors and Micron, Wang handed his personal cellphone to an assistant and instructed her to take it away—unaware that prosecutors had already obtained a court order to track the device, which also contained incriminating information.
UMC, which Wang joined in April 2016 a few days after trying to erase files from his laptop, had in January 2016 struck a deal with Jinhua to supply the designs to mass-produce DRAM in exchange for more than $700 million in fees, equipment and a cut of future licensing revenues.
Before then, UMC was mostly a foundry that made other companies’ designs.
Micron alleges in its civil lawsuit that Jinhua knew that the technology to be delivered under the deal would be based on Micron’s designs.
The files Wang transferred were a grab bag of production secrets, including test procedures and results, and processes such as placing conductive layers on chips, known as metallization, Micron filings say.
Among the items was a design protocol known as DR25nmS, which provided the basis for Wang to copy instructions that delineate the areas where the chip’s computing takes place.
Analysts say such knowledge is normally acquired via a laborious series of trial-and-error adjustments.
Figuring out such a protocol would take at least three years, if not decades.
In UMC’s case, it took two months, according to Micron.
“The Micron trade secrets that Wang stole proved invaluable to UMC’s development effort and critical to the timeline of the Jinhua DRAM project,” Micron said in its filing.
The speed of UMC’s design development helped Jinhua in October 2016 to start marketing its first two DRAM products, which it called F32 and F32S—names that Micron says were identical to the ones used for chips it produced at its Taiwan facility.
Jinhua is preparing to make trial DRAM chips later this year and mass produce next year, say industry executives and analysts.
Incorporated in February 2016 with a $5.7 billion war chest in state funds, Jinhua is a part of Project 910, the latest phase in a three-decade-old Chinese government program to build globally competitive chip makers.
Shareholders include a handful of companies ultimately owned or controlled by the Fujian provincial government.
Micron’s lawsuit and Taiwan’s indictment say Wang was told before he got hired that he would be transferred to Jinhua at higher remuneration if he satisfied his new employers.
Five months after delivering the secrets to UMC, Wang was promoted to a higher managerial position at UMC, the filings say.
Jinhua is a defendant in Micron’s lawsuit but isn’t named in Taiwan’s indictment, though it is identified as part of the prosecution’s case.
While Taiwanese officials say China’s efforts to steal technology are increasing, investigators and attorneys in Taiwan say it’s impractical to collect evidence and difficult to enforce judgments against China-based defendants.
Taiwan’s law-enforcement officials say they regularly reach out to their mainland counterparts in an effort to resolve the rising theft allegations, to no avail.
“We do talk to China,” said Wu Jung-chun, director of the justice ministry’s economic crime prevention division.
“We provide information to them. But we don’t receive any subsequent response.”

Nation of Thieves

Inside a Heist of American Chip Designs, as China Bids for Tech Power
By Paul Mozur

JINJIANG, China — With a dragnet closing in, engineers at a Taiwanese chip maker holding American secrets did their best to conceal a daring case of corporate espionage.
As the police raided their offices, human resources workers gave the engineers a warning to scramble and get rid of the evidence. 

USB drives, laptops and documents were handed to a lower-level employee, who hid them in her locker. 

Then she walked one engineer’s phone out the front door.
What those devices contained was more valuable than gold or jewels: Designs from an American company, Micron Technology, for microchips that have helped power the global digital revolution. According to the Taiwanese authorities, the designs were bound for China, where they would help a new, $5.7 billion microchip factory the size of several airplane hangers rumble into production.
China has ambitious plans to overhaul its economy and compete head-to-head with the United States and other nations in the technology of tomorrow. 

The heist of the designs two years ago and the raids last year, which were described by Micron in court filings and the police in Taiwan, represent the dark side of that effort — and explain in part why the United States is starting a trade war with China.
A plan known as Made in China 2025 calls for the country to become a global competitor in an array of industries, including semiconductors, robotics and electric vehicles. 

China is spending heavily to both innovate and buy up technology from abroad.
China is veering into intimidation and outright theft to get there. 

And they see Micron, an Idaho company whose memory chips give phones and computers the critical ability to store and quickly retrieve information, as a prime example of that aggression.
Three years ago, Micron spurned a $23 billion takeover offer from a state-controlled Chinese company. 

Today it faces a lawsuit and an investigation in China, which accounts for about half its $20 billion in annual sales.
Then Micron was the target of the heist in Taiwan, according to officials there and a lawsuit the company has brought against the Taiwanese company that employed the engineers, UMC, and the Chinese company it says wanted access to the technology, Fujian Jinhua Integrated Circuit Company.
Other companies may face similar predicaments to Micron.
One state-backed factory in the city of Wuhan, owned by Yangtze Memory Technology Company, or YMTC, will be turning out chips that look similar to those made by Samsung, the South Korean chip maker, said Mark Newman, an analyst at Sanford Bernstein.

Micron memory chips. The chips give phones and computers the critical ability to store and quickly retrieve information.

“The YMTC one is virtually identical to Samsung’s, which makes it pretty clear they’ve been copying,” Mr. Newman said.
A Samsung spokeswoman declined to comment, and YMTC officials did not return calls for comment. 

Earlier this year, Xi Jinping visited YMTC’s production facilities, one way China’s leaders show their endorsement for projects.
China defends Made in China 2025 as necessary for its economic survival. 

It still depends on other countries for crucial goods like chips and software, and China is offering funding for homegrown labs and for entrepreneurs who hope to grab a piece of the future.
But Trump administration officials in a report earlier this year recounted how Chinese officials have at times helped local companies get intellectual property from American firms, including in the energy, electronics, software and avionics sectors.
American business groups worried about Made in China 2025 point to Micron. 

The account of its struggles was based on Taiwanese and American legal documents.
In 2015, representatives from Tsinghua Unigroup, a Chinese chip maker with major state backing, approached Micron with an acquisition offer, which the company rejected. 

It later also turned down several partnership offers from Chinese companies out of concern for protecting its technology, said a person with knowledge of the situation, who asked not to be identified because the person lacked authorization to speak publicly
That was when one Chinese company resorted to theft, Micron said in documents filed last December in the Federal District Court for the Northern District of California.
Micron’s accusations focus on efforts by Fujian Jinhua Integrated Circuit, a state-backed chip maker, to build a $5.7 billion factory in China’s Fujian Province. 

Two years ago, Jinhua tapped UMC, a Taiwanese company, to help it develop technology for the factory. 

Instead of going through the lengthy steps required to design the technology, UMC and Jinhua decided to steal it.
A UMC spokesman denied the allegations and declined to comment further. 

Jinhua did not respond to requests for comment.
First, UMC lured away engineers from Micron’s Taiwan operations with promises of raises and bonuses.

Then, it asked them to bring some of Micron’s secrets with them.

The engineers illegally took with them more than 900 files that contained key specifications and details about Micron’s advanced memory chips.
Micron grew suspicious after discovering one of its departing engineers had turned to Google for instructions on how to wipe a company laptop.

Later, at a recruiting event in the United States aimed at Micron employees, Jinhua and UMC showed PowerPoint slides that used Micron’s internal code names when discussing future chips it would make.
Micron’s campus in Boise, Idaho. The state’s two senators worry that a patent lawsuit brought against the company in China could block Micron from selling some products there.

Alerted by Micron, the Taiwanese police tapped the phone of one Micron engineer, Kenny Wang, who was being recruited by UMC. 

According to an indictment in Taiwan against Wang and others, UMC reached out to Wang in early 2016 using Line, the smartphone messaging app, while he was still working for Micron. 

UMC explained it was having problems developing its memory chip technology. 

Wang then grabbed the information it needed from Micron’s servers, and later used it to help UMC’s design. 

The police said Wang received a promotion at UMC.
When investigators showed up at UMC’s offices early last year, employees rushed to hide what they had taken from Micron. 

Wang and another former Micron employee gave laptops, USB flash drives and documents to an assistant engineer, who locked them in her personal locker. 

She then left the office with Wang’s phone — the one that the police had tapped, which was quickly tracked down.
UMC filed its own criminal complaint against Wang last year, which Taiwanese prosecutors rejected. Wang and other engineers who were charged said they had taken the trade secrets for personal research. 

Wang did not respond to emails and phone calls for comment.
In January, Micron was hit with a patent infringement suit by Jinhua and UMC over several types of memory. 

As part of the suit, the companies requested the court ban Micron from making and selling the products and pay them damages. 

The case is being heard by a court in Fujian Province. 

The Fujian provincial government is an investor in Jinhua.
In a letter sent to President Trump, Senators James Risch and Mike Crapo, Republicans of Idaho, expressed concern about the entire case and specifically the rapid pace with which the patent lawsuit has proceeded. 

The case could block Micron from selling some products in China.
“If the case against Micron moves forward, and the Chinese government once again rules in favor of itself, it would cause substantial damage to Micron and the U.S. tech industry as a whole,” said the letter, which was viewed by The New York Times.
In May, China’s market regulator opened a price-fixing investigation into Micron, along with South Korean memory makers SK Hynix and Samsung Electronics. 

Memory prices have jumped over the past year, because of spiking demand and limited production by the three companies, which dominate the market. 

Another China regulator, which has said it is also monitoring the price jump, also gave a multimillion-dollar grant to Jinhua.
Jinhua and other Chinese chip makers face hurdles in catching up. 

Production of semiconductors involves a highly complex and automated production process that controls everything down to the atomic level.
Jinhua and others are spending big to get there. 

In Jinjiang, a city in Fujian Province once known as a shoe-manufacturing center, Jinhua’s new factory is almost finished. 

Rising five stories and stretching several football fields long, the structure boasts 100,000 square feet of new office space.
Economic planners in Jinjiang said they were hoping to attract more talent from Taiwan. 

In addition to adding more flights there, the town was in the process of building out a bilingual international school, a hospital with international accreditation, and new upscale apartments. 

The new plant is just a short drive from the airport.
“Most of Made in China 2025 is likely to succeed. Not all technologies are rocket science,” said Dan Wang, a technology analyst in Beijing with Gavekal Dragonomics, a research firm. 

“With enough subsidies, Chinese firms have a good shot at catching up to the technological frontier.”

Han Fifth Column

Foxconn not favored bidder for Toshiba's chip unit due to China link
By Makiko Yamazaki and Kentaro Hamada | TOKYO

Logos of Foxconn and Ennoconn are seen during the annual Computex computer exhibition in Taipei, Taiwan June 1, 2016.

Taiwan's Foxconn, the world's largest contract electronics maker, is not a favored bidder for Toshiba Corp's memory chip business due to its close ties with China, sources with direct knowledge of the deal said.
The Japanese government is worried that selling to bidders close to China may lead to the transference of key technology.
Toshiba is aware of the government's wishes and "will take into account how close bidders are to China in the selection," one of the sources said, adding that Foxconn has production lines in China.
Toshiba, the second-biggest NAND chip producer after South Korea's Samsung Electronics Co Ltd, is considering selling the majority -- or all -- of its marquee flash-memory chip business, as it seeks to make up for a $6.3 billion writedown from its U.S. nuclear unit Westinghouse.
Toshiba is valuing its chip business at least 1.5 trillion yen ($13.1 billion), people familiar with the matter have said. 

Initial bids are due by the end of the month.
Foxconn, formally known as Hon Hai Precision Industry Co Ltd, said last week it was "definitely bidding" for Toshiba's chip business and that it was "very confident" it could buy into it.
Earlier on Thursday the Nikkei business daily reported that Foxconn has approached South Korean chip maker SK Hynix Inc to explore a joint bid.
Foxconn on Thursday declined to comment on Toshiba-related matters. 

SK Hynix also declined to comment.
An industry source familiar with the matter said TSMC, another Taiwanese firm and the world's largest contract chipmaker, is also deeply interested in Toshiba's chip unit.
Elizabeth Sun, a spokeswoman for TSMC, said the company was looking at Toshiba's chip business but had yet to come to a decision.
Sources have said other potential bidders include data storage firm Western Digital Corp which operates a Japanese chip plant with Toshiba, and rival Micron Technology Inc, as well as financial investors such as Bain Capital.
Toshiba has sent invitation letters to around 10 potential bidders, one of the sources said.