10-11-2020 | | By Robin Mitchell
Recently, UMC pleaded guilty to IP theft from Micron and will help US investigators pursue the PRC owned company Fujian Jinhua. Who are the parties involved, what IP was stolen, and how does this further show China’s involvement in industrial espionage?
United Microelectronics Corporation, or UMC for short, is a Taiwanese company that produces semiconductor products. Founded in 1980, UMCs main business is in the production of semiconductor devices for fabless companies (i.e. those that only design the circuitry on the die). It ranks just behind other foundries such as TMSC and global foundries. Employing over 19,000 people worldwide, UMC has 12 fabrication sites, all of which are located in Asia, including Taiwan, China, and Singapore, and has a yearly revenue of $5 billion.
Who is Micron?
Micro is an American company specialising in semiconductor memory products such as DRAM, FLASH memory, and USB memory drives. Founded in 1978, Micron now has over 40,000 employees, a yearly revenue of $21.44 billion, and owns multiple brands including Lexar, Crucial, and Ballistix. Recognising the importance of memory development, Intel and Micron formed a company together in 2006, called IM Flash Technologies, which researchers and developed FLASH memory, but Micro now has full ownership of the company.
In 2017, it came to the attention of Micron that UMC was producing DRAM products using their technology. As this technology was patented, Micron decided to sue UMC for violating patent law in the US district court of California. After an investigation by authorities, UMC has now pleaded guilty to the charges of IP theft and industrial espionage, have been fined $60 million, and will assist authorities with investigation and prosecution of their co-defendant, Fujian Jinhua. But how did UMC and Fujian Jinhua obtain Micron intellectual property on DRAM design?
After admitting the facts to authorities, UMC stated that they had hired three employees from Micron’s Taiwanese subsidiary, which had access to Micro patents and designs. One of these three employees, Stephen Chen, was made senior vice president and instructed to lead the negotiations with Fujian Jinhua on a joint opportunity to develop DRAM products. Stephen Chen then brought in the other two ex-Micron employees to help with the development of the new DRAM range, and it was these employees that brought over confidential Micro-owned intellectual property. When UMC IT technicians discovered the sensitive files on one of the ex-Micro employees’ computers, Chen approved the use of two off-network computers for storing the sensitive files as to avoid further detection by the IT department. These files included design rules that are pivotal to Microns DRAM technology, and UMC had used this to produce their DRAM products too. When authorities began their search on UMC, only one machine was recovered, and the other had been reformatted in an apparent attempt to hide incriminating evidence.
While China repeatedly denies claims of industrial espionage and intellectual property theft, there is overwhelming evidence that supports these claims, and countries around the world have recently begun taking a stronger stance against China. One prime example of this action is the large-scale rejection of Chinese developed hardware for use in infrastructures such as 5G and power grids. Another example is the trade war between China and the US, whereby the US is using its economic strength to pressure China into following international standards and protect the interests of companies that own intellectual property. The case between UMC and Micron not only demonstrates IP theft from Chinese companies, it shows that those owned by the People’s Republic of China (PRC) are also directly involved (as PRC owns Fujian Jinhua). So, what does China have to gain from such action?
The first and most obvious reason for encouraging industrial espionage is the ability to remain technologically balanced with foreign nations. Having fast processors and high-density RAM does not only help office workers and gamers, but it is also crucial to military technology, thus helping improve a national defensive capability. Industrial espionage also allows for accelerated technological development, whereby improvements can be more quickly developed on top of technology that has only just been developed. Another important factor in industrial espionage is the cost savings; the cost of two disgruntled employees from a major technology company is far cheaper than investing in technological development. Once the IP is obtained, competitor products can quickly be produced, thus allowing for such a company to steal a portion of the market.