[30 Years of Korea-China Diplomatic Relations]⑦The Other Side of Industrial Rise... Two-Thirds of Technology Leaks Are to China

99 Cases of Technology Leaks Detected in the Past 5 Years
Chinese Companies Engage in M&A to Steal Technology and Talent... "Offering 3-4 Times Higher Salaries"
"Need for Strict Punishment Policies Including Harsher Penalties Under the Industrial Technology Protection Act"

Cheonan Industrial Complex Corporation. Photo is not directly related to the article.

The cornerstone of South Korea's industrial competitiveness is technology and talent. The end of South Korea's 30-year era of trade surplus with China is once again challenging this proposition within our industrial sector. The division of labor structure, where domestic industries produced intermediate goods such as semiconductors, steel, and petrochemicals and China manufactured finished products, is undergoing dismantling. China is using its global raw material supply chains and manufacturing capabilities as weapons to 'sweep up' the value chains of key industries, and is also fiercely competing with South Korea in industrial technology and talent behind the scenes.

◆99 Attempts to Leak Technology in the Last 5 Years... Two-Thirds Directed to China=According to the National Intelligence Service on the 23rd, there have been a total of 99 cases of industrial technology leakage detected from 2017 to February this year. The 99 technologies nearly leaked include 19 cases in displays, 17 in semiconductors, 17 in electrical and electronics, 9 in automobiles, and 8 each in shipbuilding, information and communication, and machinery. The National Intelligence Service estimated that if these technologies had been leaked, the damage including R&D expenses and sales would have reached 22 trillion won. Two-thirds of these technologies were reported to have been directed to China.

In particular, the technology leakage in the display industry, which lost its global number one position in the last 5 to 6 years, was at a blatant level. Chinese display company BOE rapidly upgraded its technological capabilities by acquiring Hi-Dis (formerly Hyundai Electronics' LCD division) in 2003 and poaching technology and personnel. The display industry argues that since Chinese companies' attempts to leak technology and personnel are becoming more specialized and sophisticated, legislative supplementation is absolutely necessary. Nam Sang-wook, a senior researcher at the Korea Institute for Industrial Economics and Trade, pointed out, "Since it could affect long-term policies in the future, displays should be included in the Semiconductor Special Act."

◆M&A to Steal Technology and Talent Amid Volume Offensive... Protection Needed for Advanced Industries like Semiconductors and Batteries=According to the Korea Information Technology Research Institute, China conducted 24 M&As of Korean companies from 2003 to 2007, 39 from 2008 to 2012, and a staggering 100 from 2013 to 2017. Not only domestically, but Chinese home appliance company Midea Group acquired Germany's largest industrial robot company KUKA in 2016 for 4.5 billion euros (about 6.05 trillion won). KUKA's products are also used in the manufacturing of the fuselage of the U.S. F-35 stealth fighter jet. Subsequently, governments in the U.S. and Europe pushed for international investment regulation agreements to guard against indiscriminate M&As by Chinese companies. The M&A of companies possessing advanced technology is judged to affect not only national competitiveness but also geopolitical hegemony between countries.

Container unloading operations are underway at Busan Port's Sinsundae and Gammam docks. The photo is not directly related to the article. [Image source=Yonhap News]

Attempts to leak technology in the semiconductor field, known as the 'rice of industry,' were also serious. Chinese foundry company SMIC, which recently announced success in securing 7-nanometer advanced process technology, hired a former Samsung Electronics vice president as its CEO five years ago. This year, a former researcher at Semes, a Samsung Electronics subsidiary, and the head of a partner company were recently sentenced to 1 year and 6 months in prison for stealing semiconductor cleaning equipment technology developed by Semes and selling it to Chinese companies, pocketing hundreds of millions of won.

The battery industry is concerned about the leakage of core personnel. Since 2016, the Chinese government has fostered domestic battery companies by not providing subsidies for electric vehicles sold in China that use Korean batteries. In this process, they have coveted key domestic researchers who have been engaged in battery R&D for 10 to 20 years. An industry insider said, "There have been cases circulated in the industry where Chinese battery companies offered more than three times the salary to poach Korean personnel," adding, "Recently, Chinese battery companies are still recruiting engineers through their Korean branches."

Although attempts to leak technology and personnel to China are at a serious level, related legislation remains at a 'featherweight' level. Jo Yong-soon, a professor in the Department of Industrial Security at Hansei University, said, "If so-called 'featherweight punishments' continue due to low prosecution rates and high acquittal rates in intellectual property crimes, it could lead to the perception that 'there is no harm in leaking technology,' resulting in more technology leakage crimes." He added, "Since the statutory penalties have already been raised, national interest in increasing sentencing standards and legal and institutional efforts to prove and estimate the scale of damage are also required."

This content was produced with the assistance of AI translation services.