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Justice Department Charges Chinese-Controlled Firm With Semiconductor Trade Secret Theft From Micron Technologies

Attorney General Jeff Sessions announces the creation of a new initiative to crack down on Chinese intelligence officials pilfering intellectual property from US corporations through hacking and espionage during a press conference at the Justice Department in Washington, DC, on November 1, 2018. Jim Watson—AFP/Getty Images

The Justice Department has charged a Chinese firm controlled by its government with the theft of semiconductor technology trade secrets worth nearly $9 billion. The grand-jury indictments were announced on Nov. 1, along with an initiative to counter what the agency called a growing threat of industrial espionage led by the Chinese government.

One state-controlled firm in China, its partner in Taiwan, and three individuals were charged with carrying out the theft of trade secrets from Micron Technologies, a chipmaker that produces state-of-the-art computer and flash memory. Micron controls about 20% of the DRAM business worldwide, and has a market cap of $45 billion.

Attorney General Jeff Sessions said at the announcement, “Chinese economic espionage against the United States has been increasing—and it has been increasing rapidly. We are here today to say: enough is enough. We’re not going to take it anymore.”

“We see it time and again: Chinese actors have stolen wind turbine technology in Wisconsin, agricultural research in Kansas, cancer drug research in Pennsylvania, and software source code in New York,” said Assistant Attorney General Brian A. Benczkowski in prepared remarks at the announcement.

The indictments claim those charged, all former Micron employees, stole trade secrets on DRAM chip design and manufacturing from Micron and brought it to Taiwanese firm United Microelectronics Corporation. UMC in turn transferred the technology to Fujian Jinhua, a government-controlled company in mainland China. Micron had already sued both companies in December 2017 over intellectual property and trade-secrets appropriation.

The indictments come in the midst of an American-initiative trade war that has led so far to the Trump administration imposing import tariffs on $250 billion of Chinese goods, based on previous year’s imports. China has retaliated with fees covering $60 billion of American goods, but has less leverage, due to the trade imbalance.

However, the administration has maintained that the tariffs have multiple goals. In addition to its intent to force China’s hand in reducing import duties that it imposes on American goods and open the Chinese market to more U.S. companies, Trump, his trade representative, and others say they are pushing for a change in Chinese policy which effectively requires foreign companies to turn over trade secrets in forced partnerships with domestic firms.

In a statement, Micron’s general counsel and legal chief, Joel Poppen, said, “Micron has invested billions of dollars over decades to develop its intellectual property. The actions announced today reinforce that criminal misappropriation will be appropriately addressed.”

Underscoring the indictment and the announcement of the initiative were the presence of Attorney General Jeff Session, FBI Director Christopher Wray, and an array of other officials from the DOJ and FBI.