[Son Seung-woo, Advisor at YulChon co., Ltd (Professor at Seoul National University); Reporter Lee Dae-il, SOYEON KIM ] According to market research firm Omdia, the market share of China’s largest memory company, Changxin Memory Technology (CXMT)—which stood at just 1% in 2022—jumped to 7.6% in the first quarter of this year. It has risen to fourth place globally for the first time in over four years. Before we knew it, it had rapidly emerged as a dark horse chasing SamsungElectronics and SK hynix.

The lesson from this CXMT technology leak incident is clear: the overseas leakage of national core technologies goes beyond simply stealing a single company’s trade secrets. It amounts to handing over the “time for the future”—which our industry has secured through enormous costs and trial and error—to competing nations. It even erodes the benefits of the government’s massive investments in the semiconductor sector.

◇“Is seven years enough even if you steal technology?”… We must first curb the expected profits from technology leaks

According to the prosecution’s investigation and court testimony, CXMT secured SamsungElectronics’ 18-nanometer-class DRAM PRP in September 2016—shortly after its establishment—by recruiting a key SamsungElectronics researcher. The PRP is a kind of “semiconductor manufacturing recipe” that details approximately 600 steps in the DRAM manufacturing process, including equipment and conditions. Just before changing jobs, the researcher hand-copied the key information onto a 12-page notebook and took it out of the company. A former Samsung executive indicted in connection with this case was sentenced to seven years in prison in the first-instance trial this past April.

CXMT’s efforts to secure talent and technology were not limited to South Korea. The company acquired DRAM patents originating from Germany’s Qimonda. The company recruited personnel from Qimonda, Infineon, Taiwan’s memory industry, and U.S.-based Micron. A distinction must be made between normal talent recruitment and the acquisition of patents. The problem arises when trade secrets and core technologies from a former employer are transferred along with the personnel. In high-tech industries, the movement of key personnel alone can significantly shorten development times.

A similar incident occurred in the United States. An employee from Micron’s Taiwan subsidiary leaked DRAM-related trade secrets after moving to Taiwan’s UMC. One employee downloaded approximately 900 confidential documents from Micron just before resigning and stored them on a USB drive and in a personal cloud account; UMC then attempted to use this information to develop DRAM technology in collaboration with the Chinese state-owned enterprise Fujian Jinhua (JHICC). While UMC admitted to the charges of trade secret misappropriation and paid a $60 million fine, Fujian Jinhua was acquitted in criminal court.

The South Korean display industry has had a similar experience. In 2012, evidence emerged that core technologies—including AMOLED, which Samsung and LG Display were developing—had been leaked to Chinese companies through employees of testing equipment suppliers. More recently, former LG Display employees were sentenced to prison terms in the first instance for leaking design blueprints and process information from the Guangzhou plant.

◇To Prevent Technology Leaks, Protect “People, Technology, and Time”

What should we do? Our response to technology leaks must also shift away from a focus on post-incident punishment toward “prevention”-centered industrial security. We must create reasons for key talent to continue their research domestically, ensure that the cost of illegal leaks far outweighs any potential gains, and stop leaked technology from being implemented in competitors’ products before it happens.

We must first reverse the economic calculus of technology leakage. It is questionable whether the seven-year prison sentence handed down in the CXMT case provides sufficient deterrence commensurate with the scale of the damage. We need a “damage-based” punishment system that reflects not only R&D costs but also △the economic value of the leaked technology, △the development time and costs saved by competitors, △losses resulting from a decline in market share, and △the profits obtained by the perpetrator in sentencing and economic sanctions. The expected loss incurred upon detection must be far greater than the expected profit from stealing the technology.

Even if post-incident penalties are strengthened, technology that has already been leaked cannot be recovered. What is needed is the “immediate containment of the spread of damage.” Once technology is implemented in overseas production lines, it is difficult to restore the status quo even if a severe sentence is handed down several years later. It is necessary to introduce “pre-indictment injunctions prohibiting the use of industrial technology” into the Industrial Technology Protection Act. Under this system, if evidence of the illegal acquisition or overseas leakage of industrial technology is established during an investigation and there is concern about irreparable damage, a prosecutor can petition the court for a preservation order. After a rigorous review, the court should be able to provisionally prohibit the reproduction, transfer, or use of the technology and even halt the production of products utilizing that technology.

At the same time, we must create incentives for key talent to remain in South Korea and continue their research. The current Industrial Technology Protection Act already stipulates protective measures such as managing the job changes of professionals in national core technologies and requiring non-disclosure agreements. However, prohibitions on outside employment and confidentiality obligations alone are insufficient to retain top talent.

Companies must expand long-term performance bonuses and stock compensation for key researchers and create a research and development environment where they can advance their careers without having to transition into management roles. The government must broaden the scope of its talent policy from “cultivating” talent to “retaining key talent.” It must also establish “second-career” pathways so that highly experienced engineers can continue to contribute their experience and expertise at domestic universities, research institutes, and component, material, and equipment companies, rather than leaving for competing firms overseas. The starting point for security must shift from controlling people to investing in them.

We must create an environment where key talent can continue their research in South Korea, and ensure that those who engage in illegal technology leakage pay a price far exceeding the benefits gained. Protecting technology, people, and the industry’s timeline—that is the core of industrial security.