UMC United Microelectronics Corp

By Aruna Viswanatha, Kate O'Keeffe and Dustin Volz 

The Justice Department unsealed charges Thursday against a Chinese state-owned firm and its Taiwan partner for allegedly stealing trade secrets from the U.S.'s largest memory-chip maker, Micron Technology Inc.

The indictment, announced alongside a wide-ranging U.S. initiative to combat Chinese national security threats, is the latest in a flurry of charges targeting alleged Chinese technology theft.

The case, which follows related criminal charges filed by Taiwanese authorities last year, charges United Microelectronics Corp., a Taiwan semiconductor foundry that is publicly traded on the New York Stock Exchange; Chinese state-owned Fujian Jinhua Integrated Circuit Co.; and three Taiwan nationals.

Attorney General Jeff Sessions also condemned China for what he said were clear violations of an accord reached with the Obama administration under which both governments agreed not to support cyberattacks to steal corporate secrets from one another.

"In 2015, China committed publicly that it would not target American companies for economic gain," Mr. Sessions said. "Obviously, that commitment has not been kept."

According to the indictment, one of the defendants was a former Micron employee in Taiwan who moved to UMC in 2015 and recruited the two other individuals who were charged to join him and bring Micron's trade secrets with them. The alleged ringleader arranged for UMC to partner with Jinhua, where he then went to work, to develop the same technology, the indictment says.

Representatives for Jinhua and the Chinese Embassy in Washington, D.C., didn't immediately provide comment. A lawyer for UMC declined to comment. The individuals, who are not in U.S. custody and believed to be overseas, couldn't be located for comment.

Micron praised the indictments in a statement, saying it has invested billions of dollars over decades to develop its intellectual property.

The unsealing of the indictment, obtained in September and made public Thursday, comes just days after the Commerce Department dealt a potentially fatal blow to Jinhua by barring exports and transfers of U.S.-origin technology to the firm, which depends on the technology to produce its own chips. Jinhua, a startup backed by $5.7 billion in state funds, is a key part of China's plan to build a world-class semiconductor industry and wean itself off a dependence on foreign technology.

The Justice Department also filed a civil action to prevent UMC and Jinhua from exporting the allegedly stolen technology to the U.S. to compete with U.S. chip firms. "We are not just reacting to the crimes...We are acting to block the defendants from doing more harm to our United States-based company, Micron," Mr. Sessions said.

Also on Thursday, Mr. Sessions announced a new "China initiative" to better combat theft of trade secrets, bribery, illegal foreign lobbying and business deals that could give foreign investors access to critical U.S. technology.

Mr. Sessions said that as part of the initiative, a new working group of Justice Department officials, including the top federal prosecutors from districts in California, Texas and other states, would increase law-enforcement engagement with U.S. universities, where the Justice Department believes Chinese Communist party initiatives target technology and threaten academic freedom.

U.S. officials have stepped up pressure on Beijing over what they describe as a wide-ranging campaign to improperly obtain critical U.S. technology. Earlier this week, federal prosecutors unsealed charges against two Chinese intelligence officers and eight others who allegedly worked with them on a yearslong campaign to steal information about a commercial aircraft engine being developed by a U.S. and a French firm.

"Taken together, these cases, and many others like them, paint a grim picture of a country bent on stealing its way up the ladder of economic development, and doing so at American expense," said John Demers, who heads the Justice Department's national security division.

With a mix of cyberattacks and on-the-ground recruiting, Beijing's corporate raiding costs the U.S. economy hundreds of billions of dollars annually, according to some government estimates. FBI officials say the agency has active economic espionage investigations leading back to China in all 56 FBI field offices that span nearly every industry and sector.

On Thursday, the FBI's deputy director David Bowdich said China poses one of the "broadest, most complicated and longest-term threats we face, " and highlighted company insiders, students, and academics who share research results with people not authorized to receive them as the types of spies the FBI is concerned about.

The administration's renewed focus on rooting out spies in the scientific community has caused concern among Chinese-American leaders and others that the Justice Department is racially profiling that community. The Justice Department has denied that, but it dropped several high-profile Chinese espionage-related cases in recent years after they fell apart.

The sharp rhetoric from senior Justice Department officials contrasted with President Trump's description of a "long and very good call" earlier Thursday with Chinese President Xi Jinping, on topics including trade and North Korea.

The Justice Department action against UMC and Jinhua comes after Micron in December sued the companies in a federal court in California, alleging they stole its talent and trade secrets. Jinhua contests the claim and the case is continuing.

Jinhua then sued Micron in January in a court in China's Fujian province -- whose government partly controls Jinhua -- and won a temporary order blocking some Micron units from selling products in China on which each company claims patents. Micron has said Jinhua's suit was a bogus retaliation measure and has criticized Beijing over its treatment.

Among the files alleged to have been pilfered from Micron are hundreds of pages of documents and large Microsoft Excel spreadsheets containing precise design specifications for the architecture of various dynamic random access memory, or DRAM, products. Micron is the only U.S.-based company to manufacture DRAM devices, and the value of the stolen intellectual property was at least $400 million and as high as $8.75 billion, according to the indictment.

Thursday's allegations also added to a growing consensus that China is in violation of the 2015 bilateral pact between Mr. Xi and then-President Obama on cybertheft. Officials said that even if the Micron case wasn't itself a cyber matter, it involved insiders stealing information with the help of cybertools.

U.S. intelligence officials and several private-sector cybersecurity firms believe the accord led to a significant decline in Chinese corporate espionage through hacking, but that the malicious activity has returned since Mr. Trump took office as hostilities over trade and other issues have escalated.

Idaho-based Micron, valued at about $100 billion, owns a 20% to 25% share of the dynamic random access memory industry, a computer technology the Chinese didn't possess until very recently, Mr. Sessions said.

Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com, Kate O'Keeffe at kathryn.okeeffe@wsj.com and Dustin Volz at dustin.volz@wsj.com

(END) Dow Jones Newswires

November 01, 2018 18:19 ET (22:19 GMT)

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