In a case that highlights growing concerns over economic espionage, six Chinese citizens were accused Tuesday of founding a company with technology stolen from Silicon Valley’s Avago Technologies and Massachusetts-based Skyworks Solutions.
The stolen mobile phone technology was used to develop a state-of-the-art facility in collaboration with Tianjin University in Tianjin, China, to produce products for commercial and military use in China, according to a 32-count indictment unsealed Tuesday by the U.S. Department of Justice.
It described the scheme as “a long-running effort to obtain U.S. trade secrets for the benefit of universities and companies controlled by PRC,” or People’s Republic of China.
The case, pursued under the Economic Espionage and Theft of Trade Secrets Act, highlights ongoing tensions between the U.S. and China over theft of trade secrets by hackers, or, in this case, by two U.S.-trained engineers and their confederates who allegedly schemed to take proprietary information and pass it off as their own.
The FBI said this month that the number of trade secrets cases overseen by its Economic Espionage Unit increased 60 percent from 2009-2013 and represents the largest growth area among espionage cases the bureau investigates.
“This is not the only case of this kind,” said Asia specialist Derek Scissors of the American Enterprise Institute. “They happen all the time.”
Melinda Haag, U.S. Attorney for California’s Northern District, on Tuesday announced the indictments and the arrest on May 16 of Tianjin University professor Hao Zhang, 36, a former engineer at Skyworks, a mobile chip supplier.
Also indicted but not in custody were five others, including Wei Pang, 35, who was an employee until 2009 of Avago, which is co-headquartered in San Jose and Singapore. Avago, which specializes in wireless communications and other technologies for cellular phones and base stations, networking, displays and industrial uses, spent $50 million developing the wireless technology involved in the case, according to the indictment.
In an email to two colleagues in 2007, Pang said they could beat competitors because they would not need to do research and development, according to the indictment. In notes involving planning for the facility in China, a section was headed, “Cost saving by moving Avago to China,” the indictment said.
“As this case demonstrates, sensitive technology developed by companies in Silicon Valley and throughout California continues to be vulnerable to coordinated and complex efforts sponsored by foreign governments to steal that technology,” Haag said.
Avago and Skyworks did not respond to requests for comment.
The technology involved in the case sorts desired radio frequencies from undesired ones and is sold by Avago to mobile phone makers and others.
The indictment lays out a scheme in which Zhang and Pang took the technology from their employers, claimed it as their own in patent applications in the U.S. and China, and then used it to gain professorships at Tianjin University and the university’s backing for their joint venture with the university, ROFS Systems. Tianjin University is one of China’s oldest and a center for investment in technology.
Officials from Tianjin University met with Pang and Zhang and others in 2008 at a San Jose residence, according to the indictment. The university followed up with an agreement to establish a fabrication facility in China while the two defendants continued to work for Avago and Skyworks.
The university also allegedly guided Pang in establishing a Cayman Islands shell company called Novana to conceal the source of the trade secrets, according to the indictment.
In 2009, Pang and Zhang resigned from Avago and Skyworks and accepted posts as full professors at Tianjin University, which formed the joint venture ROFS Microsystems.
The patent applications tipped off Avago in 2011, and Pang’s former boss at Avago visited their lab in China and recognized Avago’s technology, according to the indictment.
Zhang and Pang are Chinese citizens who met at the University of Southern California during their graduate studies, according to the U.S. Attorney. After graduation in 2006, Pang was hired that year as an engineer at Avago’s facility in Colorado and Zhang was hired at Skyworks Solutions in Massachusetts.
Others named in the indictment are Jinping Chen, 41, a professor at Tianjin University; Huisui Zhang, 34, a USC engineering graduate who later worked for Micrel Semiconductor in San Jose; Chong Zhou, 26, a design engineer at ROFS Microsystems, and Zhao Gang, 39, general manager of ROFS Microsystems.
Zhang, who was arrested at Los Angeles International Airport on a flight from mainland China, appeared Monday before a U.S. magistrate, who ordered him transported to San Jose. His next appearance is before U.S. District Judge Edward J. Davila.