Chinese businesses are deviating from the norm when it comes to hiring in order to acquire South Korean knowledge in vital fields like displays and shipbuilding, as well as crucial technology like semiconductors and electric-car batteries.

According to Yeo Han-koo, the former trade minister in Seoul, efforts to acquire South Korean technology have become more aggressive as Beijing seeks to mitigate the damage from Washington’s own moves to curtail Chinese access to American technology and expertise.

“The US tightening controls on China led Chinese companies to escalate their charm offensive towards Korean engineers and researchers, using both legal and illegal means,” said Yeo.

According to experts, "tech leakage" in South Korea can include the entirely legitimate hire of foreign experts. As it developed from a developing nation to a technical powerhouse, South Korea spent decades acquiring industrial know-how from Western and Japanese businesses.

But there are also illegal hiring practices, patent violations, espionage, and theft. According to South Korea’s National Intelligence Service, the number of confirmed leaks of “national core technologies” has increased steadily from three cases in 2017 to five each in 2018 and 2019, to nine in 2020 and 10 in 2021.

According to data from the NIS released this month, there were three breaches of national core technologies in the first quarter of 2023, with one leak each from the semiconductor, display, and automotive industries. All three were employed by large companies.

Seoul takes the issue so seriously that it is building a database of chip experts working for South Korean businesses in order to keep an eye on their travel within and outside of the nation.

In order to stop the leaks, the government has also created a number of new investigative agencies, introduced legislation to strengthen penalties, and simplified the reporting process.

Those measures appear to be bearing fruit: there were twice as many arrests relating to tech leakage in the first quarter of 2023 as there were during the same period last year.

But Hong Seok-joon, a lawmaker from South Korea’s ruling conservative People Power party, said even tougher rules and penalties were still required. “The number of tech leak cases is increasing, but punishment for perpetrators remains weak and we still lack measures to prevent them,” said Hong. “Only about 6 percent of defendants accused of tech leakage [in South Korea] are convicted because it is so difficult to prove.”

Ben Forney, a researcher at Seoul National University specializing in industrial espionage issues, said the majority of cases involved South Korean engineers, especially retirees, being hired by Chinese companies on salaries three or four times higher than those they were on before.

“In the US, the most common way for China to acquire expertise is to lure or coerce Chinese engineers who have been based in the US,” said Forney. “But in Korea, the problem is of home-grown engineers going abroad. That is why it tends to be framed here as ‘leakage’ rather than espionage or theft.”

In some instances, South Korean regulations that forbade engineers from joining a foreign rival within two years of leaving their employment were circumvented by the establishment of feigned independent "paper companies" in South Korea or Taiwan that would pay the engineers handsomely until they could be officially hired.

The pressure on South Korean companies is especially acute in the semiconductor industry. Seven persons were sentenced to prison in February for selling stolen technologies to a Chinese company, including former workers of SEMES, a Samsung Electronics subsidiary that produces wafer cleaning equipment.

Image source: Bloomberg