After the publication of an article about a scandal involving South Korea’s military intelligence authority readers have requested an article on how industrial espionage is handled in South Korea and the wider region. We will answer this question, and take the opportunity to provide an update on the data leak scandal.
The story continues
On Aug. 27, 2024, the Defense Department prosecutor’s office charged a previously arrested military intelligence officer with aiding and abetting the enemy, bribery, and violation of the Military Secrecy Law.
Prosecutors claim that the 49-year old was been recruited in April 2017, following his arrest by the Chinese at the airport while on a business trip to Yangji to conduct a liaison operation with the network he had created. Although he should have reported the arrest and attempted recruitment, he did not do so because, he claims, his family was being threatened. He began receiving cash payments from the Chinese in May 2019 and started passing classified information from June 2022, for which he received 162.05 million won ― although he had requested 400.
And in return for this amount of money, the defendant photographed secret documents using the camera on his smartphone, and also took screenshots and printed out confidential information. This information included not only military intelligence materials, but also documents from other agencies.
The in-game voice message function of a messaging service that is popular in China was used to communicate with the Chinese intelligence handler. The detainee deleted them, but counterintelligence officers were able to recover all 2,000 messages. He uploaded the collected information from his personal laptop to a Chinese cloud service, transmitting the password to access the files via voice messages in the game.
A military prosecutor told reporters, on condition of anonymity that during that period the official had handed over 30 files, 12 in the form of documents and 18 in the form of voice messages ‒ including a list of some covert agents.
High-profile industrial espionage cases of recent years
The author is aware of many stories of this kind, in most cases the secrets were sold to China, but they have been sold to other countries as well. As reported in 2023 by Cho Eun-hee, a member of the National Assembly from the ruling People Power Party, more than 65% of South Korean industrial technology that has been leaked abroad was illegally transferred to China. Citing police data, she said that between 2018 and June 2023 there had been 78 cases of leas of industrial technology, of which 51 cases involved technology transfer to China. This is followed by transfers to the US, with 8 cases, and to Taiwan and Japan, with 5 cases each. In addition, technology leaks to Uzbekistan, Malaysia, France, Saudi Arabia, Vietnam, India, Hungary, Iraq and Australia have been detected. Most of the technology leaks related to the mechanical engineering, electrical engineering, electronics, transportation, shipbuilding and robotics industries.
In the period from 2018 to 2022, the South Korean intelligence services identified 93 leaks of industrial technology to foreign companies. 24 cases involved semiconductors, and 69 cases involved displays, back-up batteries, information technology and technologies used in the automotive and shipbuilding industries. The leaks discovered by the agency involved technical information with a total value estimated at 25 trillion won.
In November 2022, an employee of a precision materials company was sentenced to two years in prison for trying to steal a glass substrate design in order to send it to a Chinese firm.
From February 1 to May 31, 2023, the National Police Agency conducted a campaign against industrial espionage, during which 35 cases of industrial espionage were uncovered and 77 people were arrested. Of the 35 cases, 27 involved corporate espionage within local companies, and eight involved the leaking of technology secrets to other countries, including China.
In February 2023, a researcher at Semes, a subsidiary of Samsung Electronics, was sentenced to four years in prison for producing and selling equipment worth 71 billion won ($54 million) to Chinese firms by illegally making use of the company’s trade secrets. Another former Samsung Electronics engineer was sentenced to 18 months in prison with two years suspended for allegedly leaking semiconductor technology to Intel.
In March 2023 South Korean customs officers, in cooperation with the National Intelligence Service, detained an organized criminal group that was involved in selling advanced technologies owned by steel manufacturer POSCO abroad. The criminals (some of whom worked for the company’s subcontractors, from where they copied the data) sold blueprints and four examples of a so–called “air knife” to two Iranian companies for 3.5 billion won in 2020 and 2021.
On June 12, 2023, a former Vice President of Samsung Electronics Co. was arrested and charged with stealing trade secrets from August 2018 to 2019. In the present author’s view, this is one of the most high-profile of these cases, as it involved a former senior manager at Samsung Electronics and a three-time winner of the annual Samsung award. He was appointed CEO of SK hynix Inc. in 2020.
The defendant was accused of trying to build a complete replica of a Samsung semiconductor plant in China after illegally obtaining confidential company data. The value of the leaked information is estimated to be at least 300 billion won.
On October 25, a further investigation into the actions of the same former Samsung executive was launched. He is suspected of leaking key semiconductor technology and human resources to China. Officials claim he sent hundreds of semiconductor specialists and engineers to Chinese factories through a staffing search firm which he had established.
On July 13, 2023, the Supreme Court sentenced the former head of technology firm Toptec Co to three years in prison term for leaking Samsung Display Co.’s edge panel technology (also known as 3D lamination technology) to Chinese companies.
On January 3, 2024, prosecutors charged a former departmental head at Samsung Electronics Co., surnamed Kim, with leaking key semiconductor technology to a Chinese company in exchange for money. Kim is accused of stealing information belonging to Samsung about the manufacturing process for the semiconductor used in its 18-nanoscale DRAM memory and transferring it to Chinese semiconductor maker ChangXin Memory Technologies (CXMT) for use in developing its own product.
In the same month, an investigation was launched into two former employees of Daewoo Shipbuilding & Marine Engineering (DSME, now Hanwha Ocean), who are suspected of stealing submarine design documents and drawings and then transferring them to Taiwan through an intermediary submarine development consulting firm.
In February 2024, an investigation was launched into the activities of two Indonesian engineers seconded to Korea Aerospace Industries and involved in a joint Seoul-Jakarta project to develop the KF-21 fighter jet, who were suspected of attempted industrial espionage and the theft of internal technological information. One of the defendants tried to smuggle a USB drive that contained 6,600 digital files into his home country.
In February 2024, the Daejeon District Court sentenced a professor at the Korea Advanced Institute of Science and Technology (KAIST) to two years in prison for leaking key unmanned car technology to China, overturning a lower court’s decision of two years in prison suspended for three years.
Measures taken by the authorities
On June 7, 2023, the authorities decided to significantly increase the maximum penalty for conglomerates that steal ideas or technology from smaller companies from the current three to five times the actual cost of the damage caused.
The Act on Prevention of Divulgence and Protection of Industrial Technology stipulates that those who transfer key technologies identified as such by the government to companies in other countries face a minimum three-year prison sentence and a fine of up to 1.5 billion won ($1.1 million). Those who allow the leakage of other types of industrial technology could face up to 15 years in prison or a maximum fine of 1.5 billion won.
Interestingly, at the same time China passed a revised anti-espionage law, which covers not only state secrets, but also information that is not considered classified, allegedly including the photographing state of institutions and key Internet infrastructure. Attending events forbidden by the Chinese government is also treated as espionage.
Moreover, the new bill gives Chinese intelligence agencies the right to access data on personal assets such as smartphones and laptops, and to impose travel bans on any suspects ― regardless of their nationality ― if they are deemed a potential threat to national security.
It is thus evident that the problem of industrial espionage is a serious one, and one with potential political implications. According to Park Hyeong-kwan, a professor in the department of police administration at Gachon University “Industrial espionage has already become a major flashpoint in US-China relations, and will be the same for Seoul’s relationship with Beijing.”The habits of the PRC intelligence services of targeting any potentially useful technology are well known in a number of other countries, but in South Korea this factor is combined with an inflated level of Sinophobia. However, we will talk about China’s relations with the two Koreas closer to the end of the year.
Konstantin Asmolov, Ph.D. in History, Leading research fellow at the Center for Korean Studies of the Institute of China and Modern Asia of the RAS, exclusively for the online magazine “New Eastern Outlook“
