U.S. Charges Six Chinese Citizens With Economic Espionage
U.S. alleges group, including three professors, stole sensitive wireless technology
WASHINGTON—Six Chinese citizens, including two professors who trained together at the University of Southern California, stole sensitive wireless technology from U.S. companies and spirited it back to China, the Justice Department charged.
The six individuals allegedly swiped trade secrets from U.S. companies Avago Technologies and Skyworks Solutions Inc. relating to how to filter out unwanted signals in wireless devices, according to an indictment unsealed late Monday.
They then set up a joint venture with China’s state-controlled Tianjin University to produce and sell equipment using the technology, according to the indictment, and won contracts from both businesses and “military entities.”
The U.S. companies supply components for Apple’s iPhone, among other devices. Authorities said the case demonstrates persistent efforts to steal American technology developed in places like Silicon Valley, where Avago’s U.S. operations are based.
“Sensitive technology developed by U.S. companies in Silicon Valley and throughout California continues to be vulnerable to coordinated and complex efforts sponsored by foreign governments to steal that technology,” San Francisco U.S. Attorney Melinda Haag, whose office is prosecuting the case, said Tuesday.
One defendant, Tianjin University Prof. Zhang Hao, was arrested when he landed at Los Angeles International Airport Saturday after traveling from China, the Justice Department said. He is in custody and his lawyer didn’t immediately respond to a request for comment. The other five defendants are believed to be in China and the U.S. is unlikely to be able to arrest them unless they travel to a country willing to detain and turn them over to U.S. authorities.
A spokeswoman for Tianjin University said the school only learned of the allegations Wednesday morning and is investigating.
A spokeswoman for Tianjin University said the school only learned of the allegations Wednesday morning and is investigating.
The charges come amid a heightened Justice Department focus on suspected economic espionage, especially by the Chinese. In May of last year, the department brought charges against five Chinese military employees who allegedly hacked into U.S. companies to steal trade secrets. In March of last year, the U.S. won convictions of two engineers who allegedly stole secrets to manufacturing a white pigment from DuPont Co. and sold them to a Chinese firm.
Last week, network security firm FireEye Inc. said it determined through forensic analysis that Chinese hackers broke into systems at Pennsylvania State University’s engineering college and could have accessed research on U.S. military technology.
The Chinese Embassy in Washington didn’t immediately respond to a request for comment. Tuesday’s allegations are likely to further inflame diplomatic tensions between the U.S. and China, which has bristled at previous U.S. accusations that it is engaged in large-scale economic espionage. The Chinese government has suggested in the past that U.S. companies pose their own threats. Last year, after Secretary of State John Kerry said Chinese hacking had a “chilling effect” on U.S. firms, Chinese state television called the iPhone’s location-tracking function a “national security concern.”
The Chinese government has stepped up activity aimed at promoting homegrown sources of semiconductors, including those used in smartphones, amid concerns about the security of foreign-made products and U.S. spying.
Chinese chip maker Spreadtrum Communications Inc., for example, has said China’s central government asked the company to begin making special-order “safe phone” processor chips for some officials’ smartphones, out of fears that chips from U.S. suppliers could have built-in “back doors” to aid foreign spies.
Economic tensions between China and the U.S. have largely centered on exchange rates and trade but that is changing as the U.S. continues to outpace China in terms of technological sophistication, said Yukon Huang, a former World Bank Director for China and a senior associate at the Carnegie Endowment for International Peace.
“In my view, the more likely source of tension in the future is going to be related to foreign technology transfer questions like this particular example,” he said, adding China has vast production capabilities enabling them to profit from trade secrets.
“Economic espionage is something that we take very seriously,” State Department spokesman Jeff Rathke said. “We’re always vigilant about these kinds of concerns.”
The charges unsealed Monday relate to film bulk acoustic resonator technology, which is used in wireless devices to filter out unwanted signals. More advanced versions of such technology allow for smaller and more efficient wireless devices, according to the Justice Department. Some of those devices have military applications.
Three of the defendants received electrical-engineering degrees from the University of Southern California in 2006. After graduation, they split up, with Pang Wei going to work for Avago in Fort Collins, Colo.; Zhang Hao to Skyworks in Woburn, Mass.; and Zhang Huisui to Micrel Semiconductor in San Jose, Calif.
Soon they began emailing about plans to create a business that would sell thin-film bulk acoustic resonator technology in China, but ran into a glitch, according to the indictment.
Intellectual property “is our biggest problem,” Zhang Huisui wrote in an email to the other two, the indictment alleges.
“My work is to make every possible effort to find out about the process’s every possible detail and copy directly to China,” Mr. Pang, the Avago employee, wrote the group a month later, the indictment says.
In another email, Mr. Pang mentioned that their company would have an advantage over rivals because it wouldn’t need to pay for research and development, according to the indictment. Mr. Pang is said to have joked that the company should be called Clifbaw—short for China lift bulk acoustic wave, referring to the technology they are accused of stealing. According to the indictment, Avago had spent 20 years and $50 million to develop its technology.
In mid-2007, Mr. Pang allegedly started to pitch Chinese universities on setting up a company to manufacture devices using what the Justice Department says was stolen technology.
Over the next year, according to the indictment, Mr. Pang was hired by Tianjin University and began working with officials there to set up a company. At the same time, he apparently remained employed by Avago.
Until June 2009, Zhang Hao stayed in the U.S. and emailed documents detailing Skyworks’s technology to Mr. Pang, the indictment says, before leaving to become a professor at Tianjin as well. Mr. Pang officially left his job at Avago in June, too, the government says. Avago and Skyworks haven’t responded to requests for comment.
In the ensuing months, the professors and their alleged co-conspirators worked to set up companies and file patents in the U.S. and China that the Justice Department says were based on stolen technology. To hide their tracks and avoid tipping off their former employers, the scientists responsible for the theft didn’t file the patents in their own names, according to the indictment.
Avago learned about the thefts from the patent applications in the fall of 2011, according to the indictment, which states that on a trip to China later that year, Mr. Pang’s old boss, Rich Ruby, dropped by his former colleague’s new lab, where he recognized technology stolen from Avago and confronted Mr. Pang about “stealing and using Avago trade secrets.”
Mr. Pang denied having any sort of company that used the technology, according to the indictment. Dr. Ruby didn’t respond to a request for comment.