In recent years, there have been frequent incidents of leaks of South Korea’s core technologies, many of which are related to China. The South Korean government recently announced a series of new measures to increase penalties for leaked individuals in order to prevent the leakage of core technology secrets and enhance the competitiveness of domestic enterprises. Analysis suggests that South Korea’s strategic policy towards China has evolved in recent years, following the United States’ trend of de-risking with China, but still carefully handling the South Korea-China relationship.
According to data from the South Korean National Intelligence Service (NIS), in the past five years, South Korea’s industrial sector has seen a total of 97 attempted cases of technology leaks, with 40 related to the semiconductor industry, 18 targeting display technology, and 31 seen as targeting the nation’s core technology. If these technology leak incidents succeed, it could result in approximately 23 trillion South Korean Won (about 168 billion US dollars) in losses. It is understood that over 60% of technology leak incidents are caused by internal personnel, often using methods like disguising as personnel transfers or corporate mergers.
South Korean Finance Minister Choi Sang-mok stated that in order to prevent the illegal outflow of advanced technology, a series of new measures will be introduced: the Korean Patent Office will establish a big data analysis system to prevent technology leaks; new regulations will be implemented, imposing harsher civil and criminal penalties on intermediaries who act during the technology leakage process, and hackers involved in infiltrating and stealing trade secrets will also face stricter civil and criminal penalties.
The South Korean government will also provide consultation services for businesses, universities, and public institutions to help strengthen intellectual property rights protection; develop an electronic fingerprint system to track stolen information; and enhance protection for 11 key technologies including semiconductors, displays, and electric vehicle batteries.
The South Korean Finance Ministry explicitly stated: “In areas such as OLED (organic light-emitting diode) and automobiles, there are concerns about technology leaks caused by mergers and acquisitions, with some companies transferring domestic technology to their overseas parent companies and withdrawing from South Korea.”
There have also been cases where South Koreans leaked technology to China for personal gain. In September of this year, two Samsung Electronics employees were arrested in China for allegedly founding a chip company worth over 3.2 billion US dollars by stealing intellectual property rights.
In June, former executives from Samsung Electronics and Hynix Semiconductor Company (now SK Hynix) were detained by the Seoul Metropolitan Police Agency for allegedly leaking Samsung Electronics’ core chip technology – the 20-nanometer DRAM process technology data to a Chinese company.
Last year, Samsung Electronics failed to pay corporate taxes due to deteriorating performance, causing government concerns over reduced tax revenue. Samsung Electronics announced on October 8th this year its preliminary third-quarter financial data, with operating profit at 91 trillion South Korean Won (about 66 billion US dollars), a 12.8% decrease from the second quarter and significantly lower than market expectations.
On the day of announcing its third-quarter performance this year, Samsung Electronics also acknowledged that one of the reasons for the poor performance was influenced by “the growth of general chip supply from Chinese storage companies impacting (Samsung’s) earnings.”
Assistant Professor of Political Science at National Taiwan University, Chen Shi-min, stated to Dajiyuan that the main evolution of South Korea’s industrial strategic policy towards China occurred after Yoon Suk-yeol took office in 2022.
“The Moon Jae-in government hardly talked about the Indo-Pacific concept. When this concept was raised by then-President Trump, it implied the containment of China. However, Yoon Suk-yeol is willing to support the Indo-Pacific concept, share liberal values with Japan, no longer be bound by historical grievances, leans considerably towards the United States, accepts U.S. policies related to China, merely de-risking, preventing China from acquiring high-tech that could challenge the established world order.”
Chen Shi-min also mentioned that over the past five years, it has become apparent that China has been utilizing South Korea’s major corporations to invest in China, demanding Korean companies to hand over technology and share with China. Consequently, many industries in South Korea are now facing competition from Chinese companies, including panel industries, electric vehicles, and semiconductors. He believes that South Korea is learning from these lessons and will regulate critical technologies.
He pointed out that currently, the most crucial high-tech industries are still in the United States or Taiwan’s TSMC. The United States is currently forming a Chip 4Alliance, an alliance among four regions on semiconductor technology, including the United States, Japan, South Korea, and Taiwan, with the goal of preventing advanced semiconductor technology from flowing into China.
Vice Executive Director of a Taiwan think tank involved in public policy, Dong Si-qi, expressed to Dajiyuan that South Korea’s high-tech industry is facing many challenges, slightly lagging in the competition for AI chips while also being affected by global strike waves. Previously, South Korea led in high-tech industries such as semiconductor technology, but it has since fallen behind TSMC and Intel. Many core technologies have been leaked to China, further weakening the international competitiveness of Korean firms.
To prevent the leakage of core technology, the South Korean Police National Investigation Headquarters decided in December of last year to establish the “Anti-spy Economic Security Investigation Department” under the Security Investigation Department.
Dong Si-qi stated that the South Korean government’s intervention is mainly due to the fact that the leakage of technology has also raised concerns from the United States about whether its core technology is being leaked externally, prompting measures to avoid sanctions from the United States. Furthermore, in recent years, South Korea’s trade deficit with China has continued to rise, with the Communist Party of China leading in technology while earning a lot of money from South Korea, garnering significant attention from South Korean political and economic circles. “Under the dual pressures of international situations and domestic demands, South Korea has now strengthened its system of anti-spy economic investigations.”
Dong Si-qi further elaborated that the South Korean government is handling this issue very cautiously without explicitly stating it is targeting China. However, it is clear to the discerning eye that many cases of commercial espionage ultimately lead back to China, thus this move is aimed at preventing China’s commercial espionage activities.