South Korea Ramps Up Spy Law to Protect Chip Secrets From China

South Korea is tightening its defenses against industrial espionage with a revised law on spying taking effect this weekend, as the home of global chip giants Samsung Electronics Co. and SK Hynix Inc. seeks to safeguard advanced memory technology from increasingly formidable Chinese rivals.

South Korea has imposed increasingly harsh penalties in recent years on former chip-industry employees caught leaking trade secrets overseas. But courts have long been constrained by the country’s narrow definition of espionage, which applied only to those proven to be spying for nuclear-armed rival North Korea.

That will change Sunday, when sweeping changes to legislation will allow courts to sentence people who pass sensitive technology to any “foreign country or an organization equivalent thereto” to up to 30 years in prison. The shift effectively elevates the theft of industrial secrets from a corporate offense to a national-security threat, reflecting how central semiconductors have become to South Korea’s economy and strategic power.

Although China is not explicitly mentioned in the revised law, its rapid progress looms large over Seoul’s efforts to guard its chip prowess. Half of all detected cases involving leaks of sensitive technology to foreign entities last year involved China, according to South Korean police data. A flurry of government and industry reports have sounded the alarm that Beijing could soon overtake Seoul.

“China’s speed is beyond imagination,” South Korea’s Industry Minister Kim Jung-kwan said last month. “It’s why I feel a sense of intense urgency.”

China’s Ministry of Foreign Affairs did not immediately respond to a request for comment.

Strong demand for high-bandwidth memory chips has propelled South Korea’s semiconductor exports, helping power the country’s economic growth. Seoul is doubling down with the government recently unveiling an $880 billion plan to develop a massive semiconductor hub in the country’s south as it seeks to preserve South Korea’s position at the forefront of global chipmaking.

Losing that edge would threaten one of the country’s most important sources of export revenue and growth. Samsung and SK Hynix are already under pressure from Chinese rivals like CXMT Corp. and Yangtze Memory Technologies Co., which have been closing the gap in global memory market share.

Read more: Korea in Race to Keep Chips Edge as China Presses, Minister Says

Such fears have fueled the emergence of a cottage industry of private investigators like Jang Jae-woong, who sees strong demand for his services from tech executives concerned about longtime employees who abruptly quit.

Departing employees tell their former bosses they’re moving to a different industry. But when Jang turns up to check what they’re doing “I would find them hunched over toolmaking blueprints,” he told Bloomberg News.

Chinese companies may have employed aggressive recruitment techniques to help fuel their rapid growth. “When Chinese companies need South Korean technology, they keep a list of specialists to contact with an offer of high salaries and benefits,” said Jon Woo-jung, a professor at the Korea Advanced Institute of Science & Technology specializing in intellectual property.

One high-profile ongoing case illustrates the concern. Ten former Samsung Electronics employees have been indicted for allegedly leaking technology to CXMT, causing an estimated 5 trillion won ($3.7 billion) in lost Samsung sales in 2024, the Seoul Central District Prosecutors’ Office has said.

Prosecutors accused the former employees of transferring Samsung’s production process for manufacturing 18 nanometer DRAM and using subterfuge like office moves and airport layovers to avoid detection.

CXMT did not respond to an email seeking comment.

CXMT’s global market share in DRAM reached 10% in the second quarter of 2026, according to data from Counterpoint Research. In July, following its blockbuster IPO, it became China’s largest onshore-listed company. Samsung and SK Hynix control about 38% and 25% of the DRAM market, respectively.

South Korea’s fight against industrial espionage has a global dimension. Since 2024, the US has imposed sweeping export controls on China and urged allies to restrict sales of advanced chips and chipmaking equipment to preserve its lead. In February, the Pentagon blacklisted CXMT, citing security concerns.

Read more: Chinese Chipmaker CXMT Sues Pentagon to Get Off US Blacklist

“The Americans are telling Korea: ‘Don’t be a weak link, stop leaking all your technology to China, stop exposing your supply chains, stop having Chinese investment in sensitive industries, because ultimately that also affects America’,” said Ben Forney of Lazlo Intelligence, a corporate-intelligence firm.

Taiwan, home to Taiwan Semiconductor Manufacturing Co., made economic espionage a crime in 2022, with legislation specifically targeting technology transfer to China.

For their part, South Korea’s major chipmakers say they take steps to prevent leaks. SK Hynix told Bloomberg News it had “established and operates various security procedures and systems to prevent technology leakage both domestically and internationally,” without giving details. Samsung declined to comment.

But while major companies typically have an in-house risk management team that can detect leaks and shore up the evidence to file a criminal case, their smaller downstream suppliers lack the resources for extensive security controls and are thus more vulnerable. Over 85% of tech leaks between 2020 and 2024 afflicted small or medium-sized businesses, according to data from South Korean lawmaker Choi Soo-jin’s office.

And while changes to South Korea’s spying law give the country a new framework to push back on the theft of semiconductor technology, it will still be a hard crime to prosecute as you need to prove nation-state involvement, says Chae Seong-joon, a military-science professor at Seokyung University and a former official with South Korea’s spy agency.

“It’s a huge blind spot,” he said, and one that will be easy for China — which legally requires its citizens to aid state information gathering — to exploit.