(Bloomberg) — Applied Materials is suing a Chinese-owned rival over what it says was a 14-month effort to steal some of its most valuable secrets, including an allegedly orchestrated employee poaching spree and secret transfers of semiconductor equipment designs.
Most Read from Bloomberg
The largest US supplier of chipmaking equipment Mattson, a Fremont, Calif.-based company acquired by Beijing-backed semiconductor investment center E-Town Dragon Semiconductor in 2016, has been accused of hiring 17 of its chief engineers over more than a year. by a little.
California-based Applied Materials said in court filings that they included a division manager and researchers who had collaborated for years and had access to sensitive information such as the chipmaking operations and the company’s technology roadmap. She sued Mattson in 2022 as well as the most recent departed employee, who the company said finally produced concrete evidence of espionage.
“Many of these documents are highly sensitive and technical and contain Applied business secrets and know-how that should give Matson years of competitive advantage in its technology trajectory and development,” the US company said in a filing in March 2022.
The Beijing Dragon Electronic Semiconductor Industry Investment Center is supported and operated by the city government.
“We are taking legal action to ensure that our intellectual property rights are protected,” Applied Materials said in a statement, adding that it “vigorously protects” its intellectual property and declined to comment further due to the pending lawsuit.
The lawsuit, which has not been previously reported, continues growing concerns about how far China is willing to go in its goal of circumventing US sanctions and acquiring the capabilities needed to build a world-class chip industry.
Mattson has denied any wrongdoing.
“The claims against Mattson are without merit and will be resolved in our favor,” a company spokesperson said in a statement to Bloomberg News. The complaint in this case was filed 16 months ago and contained no evidence to support the allegations against Mattson. No evidence has emerged since then despite the strict judicial procedures, and no evidence will appear in the future as the allegations are false.”
In a court filing, the most recent defector, Kanfeng “Ken” Lai, admitted he sent documents from his application email address to a personal account, but only to keep “souvenirs” of his accomplishments.
“I did not intend to use or disclose any classified application information in my new role at Mattson,” he said. “I have never used or disclosed any applicable confidential information (whether or not contained in documents I sent myself) outside of the application.”
Lai declined to comment. Etown did not respond to a request for comment.
In 2023, ASML Holding NV charged a former employee based in China with aiding the theft of confidential technology information — the second such allegation linked to the Asian country in a year. This week, South Korean prosecutors charged a former Samsung Electronics executive with attempting to set up an entire semiconductor factory in China based on stolen blueprints and designs.
In its complaint, Applied Materials laid out in extraordinary detail what it said were suspiciously similar circumstances around the departure of key employees. Most departing employees, she said, wiped their company-issued phones and refused to disclose their new employer, or in some cases lied. Someone updated their LinkedIn profile with new, temporarily fake employment information.
In Lai’s case, Applied Materials described how he first tried unsuccessfully to download information to a USB drive the day after he accepted Mattson’s job offer in February 2022, and then emailed loads of information to himself.
The information transmitted purportedly included a 3D rendering, detailed dimensions, and material compositions of a new type of chamber or reactor used for deposition, a key step repeated many times in the wafermaking process in which thin films of chemicals are deposited on a wafer to create layers of insulating and conductive materials.
As a leading deposition company, Applied Materials said the new chamber is the first of its kind and will enable the production of advanced, high-performance wafers. Lai was also accused of taking the company’s roadmap for a range of dielectric deposition products for 2022 and beyond.
In his announcement, Lai said his responsibilities at Mattson had nothing to do with this technology.
Lai, who holds a PhD and master’s degree in electrical engineering from American colleges, spent more than three years at Applied Materials in his most recent stint with the company, according to his LinkedIn profile. He previously worked at Applied between 1997 and 2012 and was at two different points employed by its US counterpart LAM Research Corp.
Applied Materials alleged that Lai “tried to conceal his actions by using harmless email addresses such as ‘tax’, ‘note’, ‘height’ and ‘heater’, and then ‘lied on three separate occasions’.”
Applied sued a group of little-known individuals or companies that helped Matson “misappropriate” its trade secrets. In the complaint, the company said its investigation is still ongoing and that the full scope of the accused and possibly others’ wrongdoing remains unknown.
Why the US Congress focused on China on computer chips: QuickTake
Applied Materials and ASML are some of the most advanced equipment in the world for chip manufacturing, a vital component for industries from defense to electric vehicles and computing. China, which imports more semiconductors than oil annually, has been trying to distance itself from dependence on the United States as tensions rise. For its part, Washington has enlisted allies from Japan to the Netherlands to contain China’s efforts on that front.
US officials have long accused China of corporate espionage to obtain trade secrets from Western tech companies, allegations Beijing has repeatedly denied and called a slander on legitimate scientific achievements.
A Chinese spy wants GE’s secrets, but the US got China instead
For technical expertise, Chinese companies have often relied on acquisitions of foreign firms in the past, though that maneuvering has become increasingly difficult as governments around the world have tightened scrutiny on such deals in recent years.
But in 2015 and 2016 when few people were paying much attention to overseas acquisitions of Chinese companies, E-Town announced and completed its purchase of Mattson. After ownership restructuring, Mattson is now a wholly owned subsidiary of E-Town named Beijing E-Town Semiconductor Technology Co., Ltd.
Mattson’s father has filed for an IPO on China’s Nasdaq-like STAR board in 2021. In the prospectus, the Chinese chipmaker said it provides equipment to major global clients, including Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. Chinese semiconductors. International Corp.
E-Town also said it is trying to venture into filing outside of its current business, an enforcement move it also highlighted in its complaint. Other companies competing in the field include Lai’s former employer, Lam Corporation and Tokyo Electron Ltd.
How China Aims to Counter US Efforts at “Containment”: QuickTake
In 2018, under the Trump administration, the Justice Department launched what it called the “China Initiative” to investigate China-related crimes, specifically focused on corporate espionage. But it closed the program after it was accused of inciting discrimination and several cases against academics failed in court or were withdrawn.
— with assistance from Gao Yuan, Ian King, and Peter Blumberg.
Most Read by Bloomberg Businessweek
© 2023 Bloomberg LP
