Former Huawei Engineers Jailed For Stealing Chip Tech

A court in Shanghai has sentenced 14 former employees of Huawei Technologies to prison for stealing semiconductor-related secrets, according to local media reports, as China’s government invests billions in efforts to reduce its economy’s reliance on foreign chip technology.

The Shanghai Third Intermediate People’s Court on 28 July sentenced 14 employees of start-up Zunpai Communication Technology to jail terms of up to six year, in addition to financial penalties, the state-run Securities Times newspaper reported.

The start-up was founded by former engineers at Huawei’s HiSilicon chip-design unit.

Jail time

The report didn’t disclose whether the engineers planned to appeal.

Zhang Kun, a former HiSilicon engineer, left the company in 2019 and founded Zunpai in 2021 to develop Wi-Fi communications chips, according to the report.

He persuaded former colleagues at HiSilicon to join him, and allegedly convinced them to bring HiSilicon secrets with them.

The case has attracted a great deal of public attention in China since it first came to light in 2023.

Huawei subsidiary Shanghai HiSilicon Technology that August applied to the Shanghai Intellectual Property Court to freeze 95 million yuan ($13.2m, £10m) in assets belonging to Zunpai and its subsidiaries.

In December of the same year, police said they had arrested 14 suspects for infringing chip technology-related business secrets, Hong Kong newspaper the South China Morning Post reported.

The police did not name Zunpai or Huawei, but the details provided were enough for members of the public to identify the companies.

Zunpai’s founder Zhang allegedly offered his former HiSilicon associates high salaries and stock options at the start-up to convince them to steal commercial secrets from the Huawei subsidiary by copying documents and taking screenshots, police said at the time.

‘Identical’ technologies

Police said 40 technologies at Zunpai were 90 percent identical to those at HiSilicon.

“Chips are the core foundation of the electronic information industry, requiring companies to invest significant human, material, financial, and time resources in technological innovation and research and development,” police stated at the time.

“However, some criminals attempt to profit illegally by stealing chip technology, seriously infringing on the legitimate rights and interests of companies and undermining the fair competition environment.”

China is investing massively in its domestic chip industry to reduce reliance on technologies from countries including the US, the Netherlands and Japan.

As a result, mainland China’s semiconductor foundry capacity is on its way to surpassing that of Taiwan by 2030, French research firm Yole Group projected in a study last month.

China’s worldwide share of foundry capacity is expected to reach 30 percent by 2030, up from 21 percent last year, the study said.

Massive investment

In May 2024 China launched its biggest-ever semiconductor investment fund, valued at 344bn.

The third phase of the China Integrated Circuit Industry Investment Fund, known as the “Big Fund”, is comparable in size to the roughly $53bn in incentives under the US’ Chips and Science Act, passed in 2022, which the US is similarly using to build up domestic chip manufacturing.

Huawei’s HiSilicon has been a leader in China’s chip efforts, developing advanced 5G and artificial intelligence chips that are manufactured locally, in spite of US sanctions.