Last month, South Korean President Yoon Suk Yeol called the global semiconductor competition “a national all-out war.” As the home country of the world’s two largest chips manufacturers, Samsung and SK Hynix, South Korea is a global semiconductor leader in all respects.

Its most prized possession, however, is its homegrown talent – engineers, researchers, and technicians without whom no chip plant can operate productively, no matter how well-built or well-equipped. Instead of showering these talented citizens with accolades and large annual pay packages, treating them like national treasures, the Yoon administration is hoarding them with suspicion – monitoring and charging individuals of industrial espionage – like traitors.

Even before his “all-out war” declaration, Yoon’s government had built a database of all chip engineers to track their travel in and out of the country, and aggressively arresting Korean nationals suspected of leaking technical know-hows abroad, particularly to China. Number of these “tech leakage” cases have increased from three in 2017 to 10 in 2021; the first quarter of 2023 alone had three more.

What’s happening in South Korea illuminates a conundrum that’s vexing the global fight for a tiny semiconductor talent pool. One recent case, above all others, perfectly illustrates this conundrum: the indictment of Choi Jin-seok.

Inside a SK Hynix chip plant

The “Master of Semiconductor Yield”

Choi’s arrest and pending trial have been well-reported by the Financial Times and Reuters. Here’s a brief timeline of Choi’s career and subsequent activities that led to his arrest in May:

  • 1984: Choi began his career in semiconductors, specifically memory chips, at Samsung
  • 2001: After 17 years at Samsung, he joined Hynix (not yet SK Hynix) to lead its memory chip production division
  • 2006: Choi earned the nickname “master of semiconductor yield” for being a genius in improving production processes for Hynix, helping the company catch up to Samsung despite having less resources
  • 2007: Choi became CTO of Hynix
  • 2010: Choi was passed over for the CEO job and soon resigned. (Hynix became SK Hynix in 2012 after SK Group took it over.)
  • 2015: He set up a consulting shop, Jin Semiconductor, in Singapore and began working in China
  • 2018 - 2019: Choi and a team of South Korean engineers worked to build a memory chip plant for the Taiwanese manufacturer Foxconn in Xi’an, near Samsung’s memory chip plant there. When the promised $6.2 billion investment from Foxconn did not come through, the project folded. (This is the project that would lead to Choi’s eventual arrest and lawsuit by the South Korean government.)
  • 2020: Choi formed another company, CHJS High Technologies, which is a joint venture with the Chengdu municipal government, to build memory chip manufacturing in that region of China. (Curiously, this project is not part of the South Korean government’s allegation of industrial espionage against Choi, even though he also used Korean technical talent and worked directly with a Chinese local government, unlike the project in Xi’an which was with Foxconn.)
  • 2021 - 2022: CHJS was not performing well, partially due to US sanctions taking effect and prohibiting it from acquiring lithography equipment from KLA, Lam, and ASML.
  • May 2023: Choi was arrested upon arrival in South Korea when traveling from China.

The trial of Choi Jin-seok’s case will begin on July 12. Choi rejects the government's accusation and denies all wrongdoing.

Samsung’s chip plant in Xi’an

It is not my place to comment or speculate on whether Choi is guilty or not, or whether the process technology knowledge that made him the “master of semiconductor yield” should be considered “core national technology” or not. That’s up to the South Korean judicial system, living within the political climate created by President Yoon, to decide.

What appears certain to me is that Choi does not seem to be an industrial spy operating in a complex nation-to-nation espionage scheme between South Korea and China. Described by people who know him as someone who was a diligent man, not political and “would not deceive others,” Choi’s “defection” to China was more a case of a talented engineer and executive, who got the short end of the stick in a CEO battle, could no longer stay in an up-or-out culture typical of large corporations, but was still in the prime of his career and needed a place that would appreciate (and pay for) his talent.

In fact, this predicament is not rare for talented and ambitious semiconductor executives in their 40s and 50s. (Choi left Hynix when he was 52.) There are similar past examples. One of these examples, where Samsung was actually the beneficiary, was integral to South Korea’s rise in the semiconductor industry.

Liang Mong-song, TSMC, Samsung, SMIC

Liang Mong-song was one of the founding engineers of TSMC. Being extraordinarily talented, he was the favorite lieutenant of both Morris Chang, who founded TSMC, and Chiang Shang-Yi, who was TSMC’s first CTO. However, after rising through the ranks, Liang was not chosen to succeed Chiang as TSMC’s CTO. So after 17 years at TSMC, Liang resigned in shame. (Sounds familiar?)

Liang's at TSMC's award ceremony in 2003

After waiting out his two-year non-compete agreement, during which he held a teaching position at South Korea’s Sungkyunkwan University, a Samsung-funded technical college while being flown to-and-from South Korea to teach on Samsung corporate planes, he joined Samsung full time. Samsung has had a history of trying to poach chip talent from Taiwan to bolster its own capabilities. Most famously, in 1989 then Samsung CEO, Lee Kun-hee, tried to poach Morris Chang to join Samsung to start its non-existent semiconductor manufacturing business, just a few years after Chang started TSMC. Chang, of course, declined the overture.

After Liang joined Samsung, he was instrumental in helping Samsung leapfrog TSMC to achieve the 14nm node chip-making capability by 2014. This feat propelled Samsung to become the global leader in logical chip manufacturing and led to it winning the Apple A9 chip contract over TSMC. Having fallen behind after one of its best talents “defected” to a competitor, TSMC entered a crisis period that led to its famous “Nightingale Program” – a three-shift, 24-hour non-stop R&D operation; the “Nightingale” refers to the engineers and researchers who worked the “graveyard shift.”

TSMC also sued Liang for stealing its trade secrets, while the Taiwanese media pilloried Liang for being a “traitor.” (Again, sounds familiar?) Eventually, the judge dismissed TSMC’s lawsuit, citing that Liang had properly waited out his two-year non-compete agreement and did nothing wrong.

Interestingly, Liang was later poached by SMIC – China’s “national champion” semiconductor manufacturer; he is still SMIC’s co-CEO today.

It is fair to say that Samsung (and by extension South Korea) would be nowhere on the semiconductor manufacturing landscape without its aggressive poaching of Taiwanese talent, like Liang. It is now trying to protect itself from a similar aggression from China by imprisoning its own talent, like Choi.

It takes one to know one.

Traitors or Treasures

If the judge of Choi’s case read up on how the Taiwanese Supreme Court decided on the TSMC vs Liang case, then Choi should be a free man soon. Sadly for Choi, legal precedents and stare decisis don’t work that way and rarely cross borders. Not to mention that when TSMC sued Liang, there was no global backdrop of an “all-out war” in semiconductors.

I’m not excusing or ignoring the behaviors of corporate espionage. But the larger problem that Choi, Liang, and Chang seems to illustrate is a gross mismatch between the demand and supply of highly-coveted semiconductor talent caught up in a geopolitical frenzy.

As much as every country likes to talk about how valuable semiconductors are and how important it is to onshore chip manufacturing, the policies implemented are having the opposite effect. For countries who have the talent, like South Korea, they are not being treated like prized treasures, but are instead monitored or sued, creating a chilling effect that will only prevent the next “master of semiconductor yield” from emerging. For countries who don’t have the talent, like the US and China, throwing money to lure the next Choi or Liang may be a short-term fix, but won’t solve their long-term talent shortage.

As Danny Crichton of Lux Capital, who was one of the first voices to comment on South Korea’s restrictive semiconductor talent practices, postulated, “if chip engineers made $1 million salaries, half of Stanford, MIT and the Ivy League would be studying electrical engineering tomorrow instead of computer science today.” (Lest you think that $1 million sum is a ridiculous amount, it is routine for PhD graduates from top schools studying any area of computer science to get million-dollar-plus pay packages from Big Tech.)

Instead of flexing the muscle of free market incentives, the US CHIPS Act subsidies have multiple strings attached, placing additional burden on hiring for the "friendshoring" Samsung and TSMC fabs in an American labor market that barely has any qualified talent to begin with. Meanwhile, in China, free market incentives are practiced in the crudest way – a $3.4 million home purchased by SMIC for a disgruntled Liang just to keep him from quitting, while youth unemployment has reached more than 20%. Many of those young grads would’ve been more than willing to switch their major to “double-E”, if properly incentivized.

Reflexively, scapegoating someone like Choi as a traitor may plug some short-term “tech leakage” by scaring others from working abroad. But in the long-term, smaller economies who built a rare talent advantage in a critical sector, like South Korea and Taiwan, stand to lose that advantage very quickly, if they do not celebrate home-grown talent like the treasures they deserve to be.