Inside the chip talent war: Trade secrets and a rising Chinese rival

Former samsung electronics An employee who later joined Chinese memory chip maker Changxin Memory Technologies (CXMT) was reportedly sentenced to five years in prison at the Seoul High Court on October 22 for leaking Samsung technology.

At his first trial in April, his sentence was reduced from seven years in prison. The former employee joined CXMT in 2016.

The case highlights an intensifying battle for semiconductor know-how as Chinese chipmakers close the gap with established rivals, with competition for top engineering talent increasingly at odds with efforts to protect trade secrets.

In 2023, a South Korean court granted Samsung’s request to prevent a former DRAM researcher from joining a U.S. rival. micron. According to JoongAng Ilbo, the court ruled that the two-year non-compete was not excessive and was necessary to protect Samsung’s technology and business information.

fill the gap

A decade ago, Samsung’s biggest concern about losing experienced engineers wasn’t Chinese memory chip makers.

Instead, the Korean company focused on employees leaving to existing rivals such as: SK Hynix Micron, according to a former employee who requested anonymity because the information is private.

Former employees say Samsung monitors the destinations of some of its departing employees to signal to remaining employees that a move to a competitor will be difficult.

The company also uses non-compete agreements as part of their employment contracts that restrict employees from joining rival companies for two years, and senior employees with valuable technical expertise are likely to come under intense scrutiny.

However, Samsung’s concerns were not limited to individual retirements.

“This wasn’t just one employee quitting. The company wanted to send a message to the remaining employees that moving to a competitor is not easy,” said a former employee.

Meanwhile, Chinese semiconductor companies are trying to close the technology gap by recruiting experienced overseas engineers with higher pay, stock options, housing and family support, said Jungk Choi, senior analyst at Counterpoint Research.

Choi said their expertise has helped Chinese chipmakers overcome technological bottlenecks, especially as U.S. export restrictions limit access to China’s advanced semiconductor manufacturing equipment.

While Chinese manufacturers were once seen as unlikely to catch up with established players, they are now considered “significant competitors,” he added.

Counterpoint’s Memory Tracker predicts CXMT’s share of global DRAM revenue to reach 10% in Q2 2026.

Choi said established chipmakers are tightening legal protections and internal security measures while adjusting compensation packages to retain key engineers.

South Korea has also designated certain semiconductor manufacturing technologies as “national core technologies” and increased penalties for unauthorized leaks of these technologies, Choi said.

Legal battles could intensify as Chinese memory companies expand beyond their domestic market.

“We believe that as Chinese memory companies begin to expand exports beyond the Chinese market, this trade secret management will further expand into intellectual property and legal areas,” Choi said.

Trade secret protection

Increasing competition has focused more attention on how semiconductor companies protect the knowledge accumulated by engineers involved in complex manufacturing processes.

Taiwan, home to the world’s largest contract chip manufacturer TSMCthe protection of trade secrets has evolved with the increasing strategic importance of the semiconductor industry.

Jamie J. Yang, a partner specializing in antitrust and intellectual property at Innovatas Law Firm, said Taiwan limits post-employment non-compete agreements to two years and requires employers to compensate former employees at least half of their average monthly salary during the limited period.

Yang added that the complexity of semiconductor manufacturing makes it difficult for a single engineer to have enough knowledge to replicate an entire production line elsewhere.

“It’s highly unlikely that one person will have enough knowledge to replicate that policy at other companies,” Yang said.

He added that there is likely to be a slight increase in the movement of engineers between competing semiconductor companies as competition for top talent intensifies, while trade secret litigation is also likely to increase as companies seek to protect their technological advantages.

But the challenges extend beyond Taiwan.

In Singapore, Zechariah Chan, a partner at law firm Lee & Lee, said protecting trade secrets can be particularly difficult in the semiconductor industry, where proprietary knowledge often includes intangible manufacturing techniques and methods.

Zhang said it can also be difficult to prove that competitors are using proprietary manufacturing techniques, since outsiders typically only see the final product.

“There is no clear line between engineering expertise and confidential information,” he said. General skills and knowledge remain with the engineer, but trade secrets remain with the company.

In Singapore, non-compete clauses are enforceable only if they protect legitimate business interests and are reasonable in scope, geography and duration.

Jesamyn Fewins, head of litigation at Lewis Silkin in Hong Kong, said courts in Hong Kong typically take a restrictive approach to non-compete clauses, enforcing them only when they protect legitimate business interests and going no further than is necessary.

Courts are aggressive in protecting trade secrets through court injunctions, Fewins said.

“The challenge is that trade secrets often remain in the minds of employees,” she added. Information is more likely to qualify as a trade secret if its disclosure to a competitor could cause significant harm to the former employer and the company has taken steps to restrict access.

The key for chipmakers is to clearly define what constitutes a trade secret, make employees aware of that information and put safeguards in place to limit access, Fewins said.

Samsung and CXMT did not respond to CNBC’s requests for comment.