Chinese industrial espionage threatens US

Even a stopped clock is right twice a day, so it shouldn’t be surprising that, every once in a while, the Trump administration actually gets something right. This is exactly what happened when the US Justice Department announced that it was bringing charges against two semiconductor companies, one Taiwanese and one Chinese, for conspiring to steal proprietary trade secrets from a US company.

The firm in question is Micron, an Idaho-based company that manufactures dynamic random-access memory (DRAM) chips, a critical component found in nearly all digital electronic devices. DRAM chips can be relatively simple (such as are found in pocket calculators or video games), or extremely complex, such as in computers or weapons systems.

Micron is the last company in the United States producing DRAM chips, and it holds nearly a quarter of the global market. Its leadership status in this field made it a tempting target for intellectual-property theft.

Subsequently, the US Justice Department has accused two companies – United Microelectronics Corporation of Taiwan, and Fujian Jinhua Integrated Circuit Company Ltd, based on the Chinese mainland – along with three Taiwanese nationals who worked for these companies, of conspiring to steal DRAM technology from Micron.

Industrial espionage

This is hardly an isolated incident. China has long used industrial espionage as a way to shortcut or leapfrog technological development, particularly in such critical areas as information technologies, aerospace, advanced materials and manufacturing, energy, and the like.

Many of these technological drives are expressly directed toward achieving breakthroughs advancing Chinese military modernization. But most initiatives are dual-use – that is, integrating civilian and defense science and technology (S&T) – with the critical aim of subsidizing the buildup of the People’s Liberation Army.

As such, China has over the past 20 to 25 years created a huge indigenous S&T base, lavishly funded and broadly based. But while Beijing puts considerable resources into creating home-grown technological breakthroughs, it has also greatly stepped up the pace and the ingenuity of its efforts to steal practically any foreign technology that is not nailed down.

An unprecedented and aggressive campaign

According to William C Hannas, James Mulvenon and Anna B Puglisi, authors of the book Chinese Industrial Espionage: Technology Acquisition and Military Modernization, China is in the midst of an unprecedented and aggressive campaign to acquire and exploit foreign technologies.

This process of foreign-technology acquisition is directed by the central Chinese government. As the authors put it, it is a “deliberate, state-sponsored project to circumvent the costs of research, overcome cultural disadvantages, and ‘leapfrog’ to the forefront by leveraging the creativity of other nations.”

As such, Beijing is engaged in a multi-pronged effort to acquire foreign advanced technologies through both legal and illegal means. These include exploitation of open-source information, the purchase of foreign technologies and advanced equipment, foreign direct investments, technology transfers, joint research projects with overseas high-tech firms, and the return of Western-trained Chinese students.

And, of course, China engages in extensive efforts at industrial espionage. Traditional industrial espionage has been the bread and butter of China’s spying efforts since the founding of the People’s Republic. These are done much in the way that the recent Justice Department indictment laid out: enticing individuals (often of Chinese lineage) and companies to steal trade secrets and sell or give them to the Chinese.

Hannas, Mulvenon and Puglisi in their book document a number of cases whereby Chinese intelligence organizations had stolen technology and other defense secrets from the West, which were then ostensibly incorporated (or will be incorporated) into Chinese weapons systems. These included stealth technologies, military electronics, encryption technologies, aircraft components, and technical data relating to unmanned aerial vehicles (UAVs).

Cyber-espionage helping China catch up to West

Increasingly, however, cyber-espionage (also called computer network exploitation, or CNE) has grown in importance and concern. In such cases, actual physical theft is unnecessary; the Chinese are simply breaking past security firewalls and stealing proprietary information directly from the computer systems of high-tech firms or government.

In recent years, Chinese hackers have been caught undertaking CNEs of major US defense contractors in efforts to steal sensitive military technical and export-controlled data, such as data relating to the C-17 transport aircraft and the F-22 and F-35 fighter jets.

All this industrial spying – and particularly cyber-espionage – has given the Chinese defense industry an obvious boost. Stolen foreign technologies have likely given it a chance to shorten certain weapons development programs; it is probably no coincidence that the PLA’s two most advanced fighter jets, the J-20 and the J-31, resemble in many ways the F-22 and F-35, or China’s recent advances in UAVs.

The Chinese defense industry still appears to possess only limited indigenous capabilities for cutting-edge defense S&T. Overall, China is still more of a “fast follower,” always playing technology “catch-up.” This is not necessarily a bad strategy, however. As Hannas, Mulvenon and Puglisi put it, “China’s genius, as it were, is in putting together a system that capitalizes on its practical skill at adapting ideas to national projects, while compensating for its inability to create those ideas by importing them quickly at little or no cost.”

The Trump administration is right to go after these thieves and come down hard on them. This is one of those cases where President Donald Trump’s bleating that “economic security is national security” is absolutely spot-on.