By Aruna Viswanatha, Kate O'Keeffe and Dustin Volz
The Justice Department unsealed charges Thursday against a
Chinese state-owned firm and its Taiwan partner for allegedly
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 alleged 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 what he
said were 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 alleged 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 foreign lobbying and business deals that could give foreign
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 allegedly 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, according to some government
estimates. 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 spies in the
scientific community has caused concern among Chinese-American
leaders and others that the Justice Department is racially
profiling that community. The Justice Department has denied that,
but it dropped several high-profile Chinese espionage-related cases
in recent years after they fell apart.
The sharp rhetoric from senior Justice Department officials
contrasted with President Trump's description of a "long and very
good call" earlier Thursday with Chinese President 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 some 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 alleged to have been 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 Mr. Xi 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 significant 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.
Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com, Kate
O'Keeffe at kathryn.okeeffe@wsj.com and Dustin Volz at
dustin.volz@wsj.com
(END) Dow Jones Newswires
November 01, 2018 18:19 ET (22:19 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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