Korean Authorities Arrest Many in Alleged Theft and Transfer of Samsung's Trade Secrets to Hynix

The Wall Street Journal is reporting that the world's top producers of computer memory chips are embroiled in an alleged case of industrial espionage after South Korean prosecutors indicted 18 people over alleged technology theft.

Prosecutors said Thursday those involved — including employees of U.S. company Allied Materials and its South Korean unit — are suspected of leaking semiconductor technology belonging to South Korea's Samsung Electronics Co. to its domestic rival Hynix Semiconductor Inc.

Samsung and Hynix are the world's top two producers of dynamic random access memory, or DRAM, chips, used mostly in personal computers. Suwon, South Korea-based Samsung is also the world's biggest manufacturer of NAND flash chips, used in digital devices such as cameras, music players and smartphones. Hynix ranks No. 3 in NAND, behind Samsung and Japan's Toshiba Corp.

The technology is believed to have been obtained by employees of the South Korean arm of Applied Materials Inc., a U.S. company that makes equipment for chip manufacturers including Samsung, and then passed on to Hynix, according to prosecutors.

Santa Clara, California-based Applied Materials said it was aware of the actions by prosecutors and confirmed that its vice president and some employees of Applied Materials Korea were indicted and detained.

"Applied believes that there are meritorious defenses to the charges and is taking appropriate measures to address this matter," the company said in a filing to the U.S. Securities and Exchange Commission on Wednesday.

"Applied has strict policies in place to protect the intellectual property of its customers, suppliers, competitors and other third parties, and takes any violation of these policies seriously," the company said.

Samsung, meanwhile, said it was concerned over the case and Hynix expressed "great regret."

"Hynix expresses its great regret that our employees have gotten involved in this case," said spokeswoman Park Seong-ae. "We expect that the facts of the case shall be strictly investigated and clearly revealed."

Our only comment at WombleTradeSecrets regarding this report regards the comment from the Hynix spokesperson. It is interesting to note the concession of "regret" and the admission that "our employees have gotten involved in this case." This is unique to these kinds of cases - where denials and objections are routinely pleaded as a public relations matter.

We'll keep an eye on this one for you.