FBI investigators want to charge two men for spying in Silicon Valley to benefit China, and they say it is just the tip of a massive effort by the Chinese government to set up front companies to do this sort of thing.
In the latest case, they say Lan Lee, an American citizen, and Yoefei Ge, a Chinese national, stole chip designs and software from their employers NetLogic Microsystems of Mountain View and Taiwan Semiconductor Manufacturing Co. in San Jose, and planned to go into business with the Chinese government. The Mercury News has the story about it today (reg required):
Tags: co:1-800-free-411, co:crayon, co:jingle-networks, co:Netlogic, people:Philip-RosedaleThe case highlights China’s role as the main adversary in a complex game of 21st-century espionage where many agents aren’t trained spies in trench coats but businessmen, students and researchers. Silicon Valley, counterintelligence experts say, is ground zero.
“Silicon Valley is a hotbed” of economic espionage, said Don Przybyla, who heads a FBI counterintelligence unit in San Jose. The valley is home to many of the estimated 3,000 Chinese front companies nationwide set up to steal secrets and acquire technology, according to the FBI.
4 Comments
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David Scott Lewis said:
This is certainly a concern, and as a company that helps mid-market U.S. firms set up research centers in China (and provides R&D and engineering services with a BOT — Build-Operate-Transfer — model), we recommend using common sense. For example, keep all core IP development in-house. Don’t outsource it — to anyone!!
Use China to explore secondary and tertiary market opportunities that are simply too expensive to explore in the States. Believe it or not, the labor arbitrage difference is the greatest in both percentage and in raw dollars at the highest end of the intellectual value chain. Yes, U.S. firms can save money by outsourcing software testing to China. Yeah, big deal. But the greater cost savings are in R&D and engineering services outsourcing.
And, quite frankly, we play off the fact that we’re tied to Tsinghua, China’s MIT. (Our CEO is also the head of outsourcing at Tsinghua.) Of all the universities in China, Tsinghua has the closest historical ties to the States. Surprisingly, some U.S. firms use China-based firms with close ties to the leading aerospace university — and they have very close ties to the PLA. That’s just plain dumb.
Also, investigate areas that are most likely to be funded by the NSF, not stuff that could only be funded by DARPA. Again, use common sense. If the IEEE is holding an English-language conference in China, well, it’s probably a safe area for R&D in China. Common sense.
And be VERY cautious about who you’re dealing with in China. Avoid the ultra-Nationalists and neo-Fascists. There are plenty of them. Get into conversations and see where they stand. And if you don’t like what you hear, run for your life. Once again, common sense.
BTW, the Merc article is a bit misleading about the 863 program. Use common sense, but don’t become paranoid, either. India has lousy R&D capabilities compared to China. That’s a fact and can’t be challenged by any metrics. (It’s not about Indians, it’s about India.) China is really the best bet. Want to go to Russia? I don’t think so. Besides, remember that China is a huge potential market. India and Russia: Not there yet.
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David Scott Lewis said:
BTW, the aerospace university is the Beijing University of Aeronautics & Astronautics (but everyone here just calls it BeiHang).
Regarding the 863 Program, yes, it sounds like a mysterious name — an Area 51 for China!! Actually, it was probably named by a guy who forgot his wife’s birthday once too often: “863″ means March 1986. This is when Deng Xiaoping approved the National High-tech R&D Program. Nothing mysterious about it.
Finally, regarding the India versus China comment, I want to make it very clear that as someone who has held VP roles in the two largest U.S.-focused China-based IT outsourcing firms, the gap between India and China in ITO is widening, NOT narrowing (as many Chinese would like everyone to believe). But in R&D and engineering services, China is ahead of India. NASSCOM, whom I greatly respect, plays loose with their definitions and tries to make a claim that India is ahead of China. Not so. Anyway, do a search for English-language papers published in China and India in the Science Citation Index, the IEEE Computer Society Digital Library, you name it, and the hits for China will exceed the hits for India. Last note: A third party research service listed 68 English-language scientific and technical conferences in China held (or scheduled) during 2006 versus 54 for India. Not a huge gap, I admit, but China still leads. For a Bachelor’s, go to IIT. For a Master’s or Doctorate, China offers many more and much better options. And R&D and engineering services play at this level, not at the undergrad level.
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Dan Woodard said:
Yellow Peril or Urban Legend?
The basic allegation made in this article, that large numbers of Chinese in the US are here as spies, are wildly unsubstantiated. It’s pretty tough to believe there are 3,000 “Front” companies and 200,000 Chinses in this country, a large percentage here to spy, yet the FBI has not even caught one! The two or three cases where a Chinese national or Chinese-American has even been accused of spying have embarrasingly collapsed before trial. Even a government agency like the FBI couldn’t be so incompetent that it could not catch even one out of 200,000 known spies, who, (unlike the majority of immigrants), have virtually all applied for and been granted legal visas. If Chinese students learn something useful in business while studying at our universities, without infringing the law, then they are doing exactly what we invited them here to do.
From the point of view of a white American, the story might sound patriotic. From the point of view of some Chinese-Americans I have discussed it with, it is pretty blatant racism.
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Another China Consultant... said:
Beware the stats… always beware the stats… That being said, there is probably much more truth than someone in my line of work would ostensibly wish to believe.
I highly recommend all companies outsourcing manufacturing, software, or any technical materials to China to not go it alone. Rather seek out an American company with a solid track record in China with finding manufacturers that will not swipe your trade secrets. They’re out there - shelling out a few bucks is more than worth your while
