The two largest memory manufacturers are concentrated in South Korea, so it is expected that interest in their technology and development from Chinese competitors will be high. The country’s authorities are trying to strengthen protection of local memory manufacturers by increasing liability for industrial espionage at the legislative level. Changes to South Korean law will take effect this weekend.
Image source: SK hynix
The point is, as he explains BloombergFor years, local legislation has interpreted “industrial espionage” as activity carried out primarily for the benefit of neighboring North Korea. Changes to the law that come into effect next week will allow courts to define the term as relevant activity on behalf of any foreign country or organization. Those who violate the laws in this area face up to 30 years in prison. In fact, industrial espionage is rising from a corporate threat level to a national security level.
China is not directly mentioned in South Korean legal texts, but statistics from the South Korean internal affairs agency show that more than half of the cases of overseas leakage of sensitive technology discovered last year were related to China. Protecting the interests of South Korean memory makers has become a national priority as their export revenue accounts for a significant portion of domestic gross production. The plan to develop the country’s semiconductor industry involves investments of up to US$880 billion. The South Korean authorities certainly do not want to risk their leadership in this area, and China now poses the greatest threat to the country from a competitive perspective.
Espionage has even created demand for the services of private detectives, who investigate alleged leaks of technological secrets in South Korea. Chinese companies are willing to attract valuable experts with high salaries and other material benefits. In 2024, 10 former Samsung Electronics engineers were accused of illegally transferring technical secrets to China’s Changxin Memory; the South Korean memory manufacturer suffered losses estimated at $3.7 billion. According to investigators, Changxin Storage is interested in acquiring memory production technology based on 18nm lithography standards.
According to statistics from Counterpoint Research, in the second quarter of this year, Changxin Memory controlled 10% of the global DRAM market. Samsung accounts for 38% and SK Hynix accounts for 25%. South Korea’s leadership listens to the opinions of the U.S. authorities in the political realm. As early as February this year, the U.S. authorities included China’s Changxin Memory on the list of companies prohibited from cooperating with U.S. customers in the defense field. Taiwanese authorities have criminalized industrial espionage in 2022. TSMC, the world’s largest contract chip maker, has operations in Taiwan.
South Korean memory manufacturers are stepping up measures to protect sensitive corporate information. However, smaller partners and contractors often become the “weak links” in the production chain. Between 2020 and 2024, more than 85% of the leakage of valuable technical information was precisely related to the activities of representatives of Korean small and medium-sized enterprises. However, legal experts point out that the country’s new law requires the gathering of evidence in favor of a suspect’s involvement in gathering information for foreign interests in order to impose the harshest penalties for spies.
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