Defending Against State-Sponsored Espionage Targeting the U.S. Private Sector is a Team Effort
By 2430 Director Glenn Chafetz. This article first appeared in The Cipher Brief.
Last year, Congress spent 52 billion dollars on the CHIPS Act to advance the semiconductor industry in the United States because semiconductors are critical to the U.S. strategic advantage. Yet, the U.S. government and private sector spend almost nothing to protect that advantage, specifically against state-sponsored theft. It makes little sense for the U.S. government to support private sector research, development, and manufacture of critical technology like semiconductors, and then lose those hard-fought gains to espionage.
Approximately 80 percent of all economic espionage prosecutions brought by the U.S. Department of Justice (DOJ) allege conduct that would benefit the government of the People’s Republic of China (PRC). What the PRC government learned decades ago, was the asymmetric advantage of attacking United States defenses where they are weakest – its private sector. The PRC organizes the entirety of the country’s intelligence, economic, law enforcement, and justice resources – all protected by the shield of sovereignty – to attack individual American companies. This is not close to an even contest, and predictably, the U.S. is losing.
A recent example from the semiconductor measurement and quality control sector illustrates this imbalance. A small California company developed tools that makers of advanced chips require to detect defects, especially as manufacturers introduce new processes, materials, and methods. According to the Congressional testimony and court filings of the company, in 2020, three employees of FemtoMetrix – all PRC citizens – assumed to be loyal to the company and invested in its success, suddenly left and returned to China. They allegedly took with them trade secrets and proprietary technology, and then formed their own company, Weichong Semiconductor. Prosecutors believe they made a business plan based on FemtoMetrix’s business, and started soliciting FemtoMetrix’s customers, and even listed current FemtoMetrix employees as Weichong employees and circulated promotional images still showing FemtoMetrix name. This is the definition of brazen.
Sadly, this kind of case is common. The FBI estimates that losses from theft by China alone total somewhere between 200 and 600 billion dollars per year. This is almost certainly an underestimation because in many cases of espionage, the victimized U.S. companies do not know they have been plundered, or if they do, they do not report it or seek redress.
