Chinese chipmaker cleared in US criminal trade secrets case

A CHINESE chipmaker was cleared of economic espionage and other criminal charges in a setback for a United States Justice Department crackdown on intellectual property theft by China.

More than five years after the Commerce Department blacklisted Fujian Jinhua Integrated Circuit as a threat to national security, US district judge Maxine M Chesney in San Francisco found the company not guilty following a non-jury trial. Her ruling on Tuesday (Feb 27) may temper the Biden administration’s pursuit of aggressive prosecutions to protect American technology.

Chesney concluded that US prosecutors failed to prove that the Chinese state-sponsored company misappropriated proprietary data from Micron Technology, America’s largest memory-chip maker, that allegedly passed through Taiwan’s United Microelectronics Corporation (UMC) in a manufacturing deal with Fujian Jinhua. UMC assisted the Justice Department in its case against Fujian Jinhua after pleading guilty in 2020 to trade-secret theft and paying a US$60 million fine.

Had the company been convicted, Fujian Jinhua could have faced a fine, as well as an order requiring it to forfeit chips and income derived from the allegedly stolen technology, according to a Justice Department statement when the case was first filed.

Representatives of Fujian Jinhua and Boise, Idaho-based Micron did not immediately respond to requests for comment, nor did the US Attorney’s office in San Francisco and the Chinese embassy in Washington.

Significant verdict

The verdict is significant because while the US has pursued and won numerous convictions of individuals for unlawfully transferring intellectual property to China, the Justice Department has rarely prosecuted Chinese companies in US courts.

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The case against Fujian Jinhua was filed in 2018 amid then-President Donald Trump’s trade war with China and touted as a marquee effort to crack down on Chinese spying at US companies and research universities. In 2022, the Justice Department under President Joe Biden ended Trump’s “China Initiative” after it came under intense criticism for fanning discrimination against Asian Americans – even while pressing forward with the Fujian Jinhua prosecution.

While Biden and Chinese President Xi Jinping have generally sought to stabilise relations that had deteriorated over espionage concerns and other issues – including at a November face-to-face summit during an Asia-Pacific conference in San Francisco – the world’s biggest economies continue to vie for tech supremacy.

Micron, meanwhile, appears to have attempted to pacify Beijing, including promising to invest another 4.3 billion yuan (S$818 million) in its Chinese chip-packaging plant and sending chief executive officer Sanjay Mehrotra to visit China.

Micron and Fujian Jinhua in December reached a settlement in which they agreed to drop all claims against each other, including a civil suit filed by the US company the year before the Justice Department brought criminal charges against the Chinese firm.

The settlement came months after the Chinese government in May barred Micron’s chips from “critical infrastructure” over cybersecurity concerns. The US has worked with allies to prevent Beijing from obtaining the most advanced semiconductors and the latest chipmaking technologies. BLOOMBERG