Taiwan’s UMC pleads guilty to US charges of trade secret theft

Taiwanese contract chipmaker United Microelectronics Corporation has pleaded guilty to a US criminal charge of stealing trade secrets and been fined $60m, the second-largest penalty for such cases.

UMC escaped more serious charges in exchange for co-operating against Chinese memory chipmaker Fujian Jinhua, its co-defendant in the case, according to the US Department of Justice.

The case played out in US courts against the backdrop of deepening tensions between Washington and Beijing under the presidency of Donald Trump. Those attitudes have hardened among both Republicans and Democrats.

“UMC’s guilty plea points this case towards trial against Fujian Jinhua in 2021,” said David Anderson, a US attorney for the northern district of California.

US authorities charged both companies in November 2018 with stealing trade secrets from Micron Technology, the American memory chipmaker. Washington also added Fujian Jinhua to its export control list of entities deemed a threat to national security, a move that cut the Chinese chipmaker off from vital supplies of US equipment and subsequently forced a halt to its operations last year.

The dispute started several years earlier. According to Taiwanese court documents, two engineers at Rexchip, a Taiwanese memory chip company which Micron bought in 2013, joined UMC in 2015. A year later, UMC inked a co-operation deal with Fujian Jinhua that included assistance from the Taiwanese chipmaker to help the Chinese company increase production. 

As part of its plea, UMC admitted hiring three Micron employees from the US company’s Taiwan subsidiary, two of whom are alleged to have brought confidential Micron information with them to UMC. The individuals worked on a chip production deal UMC had with Fujian.

The case has drawn attention to the risk of technology leakage through Taiwanese companies, which dominate global contract manufacturing of semiconductors and electronic gadgets for western brands but are also highly reliant on China. As part of its push to “decouple” global supply chains from China, Washington is pushing Taiwanese technology companies to side with the west and reduce their ties with China. 

“UMC stole the trade secrets of an American leader in computer memory to enable China to achieve a strategic priority: self-sufficiency in computer memory production without spending its own time or money to earn it,” said Jeffrey Rosen, the US deputy attorney-general.

UMC said the US justice department had agreed to drop charges of conspiracy to commit economic espionage and conspiracy to steal intellectual property as part of the settlement deal. 

In a statement to the Taiwan Stock Exchange on Thursday morning, the company said its employees had transferred the Micron technology to Jinhua in violation of their employment contract. “UMC never intended to and did not transfer any unauthorised information to Jinhua,” it said. “However, according to the US Trade Secrets Act, even if employees violate company policies without the knowledge of senior management, the company still bears legal responsibility for the employees’ actions. Therefore UMC admitted and took the responsibility for the employees’s legal violations in the settlement agreement.”

UMC’s negotiations on the settlement, announced on Wednesday night in the US, have been driving the company’s stock price for months. Shares on the Taiwan Stock Exchange rose 0.8 per cent on Thursday morning a day after closing closed at NT$35.50 ($1.24), the highest level in more than a decade. 

Fujian Jinhua did not immediately respond to a request for comment.

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