Dutch Firm ASML Says It Suffered IP Theft, Rejects ‘Chinese’ Link

Dutch ASML said on Thursday it had been the victim of corporate espionage in 2015 involving employees from countries including China but said it had not been the target of any “national conspiracy.”

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.

Following publication of a story in Dutch daily newspaper Financieele Dagblad (FD) that said ASML had been struck by Chinese espionage, the company took issue with that label. “The suggestion that we were somehow victim of a national conspiracy is wrong,” CEO Peter Wennink said in a statement.

“We resent any suggestion that this event should have any implication for ASML conducting business in China. Some of the individuals (involved) happened to be Chinese nationals,” he added.

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 an earlier statement.

ASML is the dominant maker of lithography systems, used to trace out the circuitry of semiconductor chips.

Its 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.

California case

The FD story was based in part on ASML sources and in part on documents from the Santa Clara, California Superior Court that showed six former ASML employees, all with Chinese names, breached their employment contract by sharing information on ASML software processes with a company called XTAL Inc.

The FD reported that XTAL, which makes electrical design automation for semiconductor systems, is a subsidiary of a China-based company called Dongfang Jingyuan, which it said in turn has ties to the Chinese Ministry of Science and Technology.

In its reaction, ASML said XTAL’s funding came from “South Korea and China.” It said the aim of the theft was to create a competing product and sell it to an existing ASML customer in South Korea.

The company confirmed the FD’s report that the court had awarded ASML $223 million in damages.

“It is unclear to what extent these damages can be collected from the now bankrupt company XTAL,” ASML said.

ASML shares slipped 1.5 percent by 1210 GMT to the bottom of a flat European technology index.

ASML’s major customers include Samsung of South Korea, TSMC of Taiwan and Intel of the United States.

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.

In a reaction, the intelligence agency AIVD said it could not comment on individual cases.

“In a broader sense, the greatest threat of economic espionage comes from China,” it said in an email to Reuters. “The Netherlands is an attractive target, other countries are interested in our information in science and technical expertise.”
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