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ASML falls victim to Chinese corporate espionage

AMSTERDAM (Reuters) – Dutch ASML was the victim of Chinese corporate espionage a few years ago, but said the information stolen was not a blueprint for the lithography machines that have made it a world leader in semiconductor equipment.

ASML said the perpetrators took “large files” on memory sticks from its Silicon Valley software subsidiary that develops software for machine optimization. It said it had since taken action to make such theft much more difficult.

The Dutch company welcomed a Sino-European agreement earlier this week, which promised that Beijing would no longer force foreign companies to share sensitive know-how when operating in China.

“Can we prudently do business in China? Yes of course. This was a rotten apple,” ASML said in a statement.

ASML’s sales to China more than doubled to 1.8 billion euros ($2 billion) in 2018 as Beijing drives growth of its domestic semiconductor industry, now accounting for about a sixth of ASML’s total sales.

The company did not directly answer questions as to whether Chinese employees and the Chinese government were involved, as alleged by Dutch business daily Financieele Dagblad, which first reported the news.

It said information about the incident was available in public U.S. court documents relating to a case it won last November.

The documents from the Santa Clara, California Superior Court show six former ASML employees, all with Chinese names, breached their employment contract by sharing information on ASML software processes with XTAL, the FD showed.

In 2015, ASML disclosed a breach of its computer systems, but said at the time damage from the hack was limited and released few further details.

ASML shares slipped 1.2 percent by 0944 GMT to the bottom of a flat European technology index.

LOSSES

ASML is the dominant maker of lithography systems, used to trace out the circuitry of semiconductor chips. Major customers include Samsung of South Korea, TSMC of Taiwan and Intel of the United States.

The FD report, which cited court documents and its own investigation, said the theft had resulted in hundreds of millions of dollars in losses. The newspaper based its report partly on company sources and partly on the California court ruling in a suit between ASML’s U.S. subsidiary and a subsidiary of a Chinese company, XTAL Inc, which specialized in electrical design automation for semiconductor systems.

“The FD’s investigation found XTAL’s Chinese parent company Dongfang Jingyuan has ties with the Chinese Ministry of Science and Technology,” the paper said.

ASML itself had “found no hard proof of involvement of the Chinese government,” the FD added.

The court awarded ASML $223 million in damages and XTAL filed for bankruptcy a month later.

The Dutch intelligence agency has included warnings in its annual threat assessments for the past several years, saying that China is targeting tech companies in the Netherlands, as it does in other countries, for intellectual property theft.

The Dutch intelligence agency AIVD did not immediately respond to a request for comment on Thursday.

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