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Management Report

Management reports, briefs issued by Samsung Economic Research Institute

Korea's Technology Leaks

Korea's Technology Leaks

LIM Young-Mo

Oct. 23, 2004

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Concern is growing recently over the increasing instances of technology leaks from Korean companies - especially from those dealing with core areas pertaining to semiconductors or mobile phones. Uncovered attempts to secure key technology through illegitimate means, especially from the information technology (IT) sector, by individuals or companies abroad, have run to 51 cases from 1998 to the present, possibly worth 44 trillion won in estimated damages if they were successfully completed.

Attempts at illicit, if not illegal, technology transfer were especially evident in 2004, numbering a record high of 11 cases in the first eight months of this year. Cases exposed to the industry may represent just the tip of the iceberg. The real value of damages inflicted should be much greater, only it is impossible to calculate. This is so because many Korean companies falling victim to technology leaks or thefts usually choose to conceal them, fearing that the news, when publicized, would bring downtheir company share value or setbacks to their corporate credibility.

But some technologies do flow out by legitimate means, such as through sale of companies or lawful merger and acquisition deals. Other forms of leakage occur when Korean companies take technologies abroad as they move production base. So, not all technology leaks happen in illegal ways.

There are two reasons for the recent upsurge in technology leaks. Firstly, Korea is beginning to attain a level of technology almost matching that of advanced countries, especially in the area of information technology. This is evident from the fact that at least 70% of total attempts at illicitly transferring core technology has occurred in the IT sector. Also, foreign companies seeking technology from Korea through questionable means are no longer confined to those based in China but also in Japan and the United States. Secondly, illicit transfer of sensitive technological information or intelligence occurs as Korean employees at headquarters face job insecurity from layoffs or early retirement as a result of economic slowdowns. More than 80% of the cases involving technology leaks or thefts have involved current or past employees falling prey to foreign-based temptations.

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