Ex-ASML worker accused of data theft is being probed for ties to China

Investigators are looking at potential ties between the Chinese government and an ex-employee accused of stealing data from ASML – a company critical to producing the world’s most advanced computer chips.

The former employee, who was based in China, was identified as having potential ties to a Chinese state-sponsored entity and stealing the data on its behalf, according to two people familiar with the company’s probe, who asked not to be identified because the information is not public. The entity was one that has previously been linked to intellectual property theft, said the people, who did not provide the name of the group itself.

US government officials are among those investigating a link between the former employee and Beijing, one person familiar with that inquiry said.

The Dutch company investigated a connection between the worker and the Chinese government itself but has not established a direct link, according to one person familiar with the situation. ASML is conducting its own investigation and declined to comment further, a company spokesperson said.

A representative for the Chinese embassy in the US did not immediately respond to a request for comment. The Chinese Embassy in the Netherlands could not be reached for comment. The Dutch government declined to comment on whether it is also investigating a link between the former employee and the Chinese government.

US officials have accused China of using a vast system of incentives to facilitate the theft of IP from Western companies.

The alleged data theft, disclosed in ASML’s annual report last week, is the second such breach that the Dutch company has linked to China in less than a year and comes as the US is pressuring other nations including the Netherlands to help keep China’s chipmaking abilities from advancing. Tensions were already high after an alleged Chinese spy balloon hovered over US airspace before being shot down.

At stake is the potential for thieves to siphon off key technology for systems that are critical to making the world’s most-advanced chips. The Dutch technology company is one of the few producers of the machines needed to make mid- to high-range semiconductors. More specifically, it manufactures lithography systems needed to shrink and then print patterns of transistors onto silicon wafers, which are then sliced into individual chips.

ASML has not sold any of its most advanced extreme ultraviolet lithography machines to China because the Dutch government has refused to grant it a licence under US pressure.

The Dutch company initiated an internal investigation and tightened security controls after discovering the alleged theft. It notified the authorities in the Netherlands and the US after assessing that theft may have violated export controls.

Earlier this year, Netherlands has joined the US effort to tighten restrictions on exports of chip technology to China. ASML’s home country will also prevent it from selling to China at least some immersion lithography machines, the most advanced kind of gear in the company’s deep ultraviolet, or DUV, lithography line, people familiar with the talks have told Bloomberg. The company will still be able to sell less sophisticated chipmaking systems to the Asian country.

ASML is so crucial for the chip industry that it controlled more than 90 per cent of the US$17.1 billion global market for lithography equipment as of 2021, according to research firm Gartner Inc. Its near monopoly on the most advanced lithography systems makes it a critical cog in the industry and a target for spying.

ASML’s chief executive officer Peter Wennink has resisted some of the restrictions on his company’s ability to do business in China. He has warned that the country will ultimately develop its own domestic alternatives if it cannot buy from the West. China is ASML’s third-biggest market after Taiwan and South Korea.

Last year, ASML accused Beijing-based Dongfang Jingyuan Electron of potentially stealing trade secrets. The company was founded by a former ASML employee who has an outstanding arrest warrant in California on allegations of stealing trade secrets from the Dutch company. ASML’s attorneys alleged in a 2018 trial that the ex-employee, Zongchang Yu, created Dongfang and a related company in California in 2014 that worked in tandem toward the same goal: obtaining the Dutch company’s technology and transferring it to China. South China Morning Post