Dutch microchip maker accuses former employee of stealing tech for China

The Dutch manufacturer of the world’s most advanced chip-making lasers accused a former employee for stealing critical technology for China, who is trying to build up its own semiconductor industry.

Zongchang Yu, who worked as an engineer at ASML until 2012, founded two companies in 2014 that recruited engineers from his former employer – Xtal in Silicon Valley and Dongfang Jingyuan Electron in China.

ASML sued Xtal in 2018 after it began marketing optical proximity correction (OPC) software, a critical component of chipmaking that ASML is a leading expert in, according to Bloomberg.

Its attorneys argued that the two companies were part of an concerted effort to obtain ASML’s technology and transfer it to China for a government-sponsored initiative to turbocharge domestic manufacturing.

The attorneys said multiple thefts occurred, including an incident where an ASML employee Yu recruited copied the 2 million-line source code for ASML’s OPC software onto a hard drive, which he took to a new job at Xtal and immediately uploaded to a server accessible by both Xtal and Dongfang engineers.

Xtal lost and filed for bankruptcy. Yu fled for China and still has an outstanding arrest warrant in California.  

The most recent allegations are buried in ASML’s annual report from February and say Dongfang is continuing to use its trade secrets, with Yu running the company from Beijing with ample support from the Chinese government, according to the company’s statements.

ASML is the world’s only manufacturer of extreme ultraviolet lithography machines, which create microscopic circuits onto silicon wafers. Each runs about $160 million and are as large as a bus, reports Fox News.

As of 2021, ASML controlled more than 90% of the 17.1% billion global market for lithography equipment, reports Bloomberg.

But it is forbidden from selling these machines to China, meaning the country will continue to lag behind the rest of the industry because it is stuck on older tech.

The accusations reflect the delicate balance ASML is trying to take between expanding in China, the world’s largest semiconductor market, and pursuing claims of IP theft against a government-backed Chinese company, according to Bloomberg.