9 Charged With Selling Samsung’s Bendable Screen Technology
After years of working on its foldable display prototypes, Samsung is now stuck facing an ugly fact — the technology behind those screens may have already been sold to a Chinese competitor by one of Samsung’s own suppliers. That’s the claim made by South Korean prosecutors today in charges levied against 9 unnamed individuals and two companies.
A CEO of one of Samsung’s suppliers and eight of his employees received $13.8M in payments after conspiring with an unnamed Chinese company to transfer information related to OLED production to the latter in direct violation of the company’s agreements with Samsung, according to Bloomberg. While the Bloomberg piece doesn’t dive into enormous detail, it suggests the supplier and his co-conspirators were literally caught red-handed with components critical to the manufacturing of what Samsung calls its Infinity Flex display.
The South Korean supplier transferred “3D lamination” technology and other equipment to the Chinese screen maker between May and August, violating a non-disclosure agreement with Samsung, according to the prosecutors. They were caught while loading additional pieces onto a ship headed for the mainland, they said.
This type of IP theft has been a major concern for decades, but the nature of what’s being stolen has changed. More recently, companies have expressed concern over mandated technology transfers that China has required of Western companies looking to do business with the nation. In the past year, we’ve seen a major case unfold between Fujian Jinhua Integrated and Micron, with Micron alleging that Fujian Jinhua attempted to steal its trade secrets in partnership with UMC. At the same time, China has begun its own investigation into alleged antitrust activity between Micron, Samsung, and SK Hynix in the DRAM market.
It’s entirely possible for Micron to have been the victim of IP theft and to have engaged in illegal collusion with other companies to manipulate the price of DRAM. But the fact that China is flexing its own muscle on regulatory matters could well be intended as a warning to other companies. China has also launched its “Made in China 2025” program, which seeks to increase the Chinese domestic content of core manufacturing to 70 percent by that year, in a direct bid to become a major manufacturing competitor of the United States. In order to achieve those kinds of figures, China needs increased access to more advanced R&D and has instituted the aforementioned forced transfer agreements to require companies to share it.
While it may be appealingly simple to draw a straight line between the current US-China trade war and China’s IP wardriving tactics, research suggests experts are divided on how they characterize the type of IP being stolen and the degree to which the current trade war is likely to address it. The conservative American Enterprise Institute notes that there’s little agreement on exactly how much IP theft China is responsible for ($250B – $600B annually is the estimated range). Chinese IP theft from the US is believed to have decreased following an agreement by Chinese President Xi Jinping and then-President Obama but is thought to have ticked upwards again more recently. The current round of tariffs on Chinese goods is not thought to have reduced overall incidents of IP theft, at least not yet. The Council on Foreign Relations has published a primer on the Made in China 2025 initiative that gives more details on what the project entails and what the criticisms of it are (as well as the Chinese response to those criticisms).
There has been a widespread bipartisan condemnation of China’s behavior, but less agreement over what the United States’ response should look like. The theft of OLED technology from Samsung could be a particularly nasty blow to the company given just how slow the road to OLED commercialization has been in the first place. OLEDs first began to tip up as a topic of conversation in the early 2000s, but it took years to bring them to market in phones and TVs. Foldable devices have taken even longer. These technology advances have been years in the making — Bloomberg reports that Samsung spent six years and $134M on developing flexible OLEDs, but that figure doesn’t represent the full cost of the R&D on OLEDs (a functional prerequisite to building foldable/flexible displays).
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