Chinese Chip Maker Acquitted of US Espionage Charges in Landmark Case

In a significant setback for the US Justice Department’s efforts to combat intellectual property theft by China, a Chinese chip maker, Fujian Jinhua Integrated Circuit Co., has been cleared of economic espionage and other criminal charges.

Following a non-jury trial, US District Judge Maxine M. Chesney in San Francisco found Fujian Jinhua not guilty. This verdict, delivered nearly five years after the Commerce Department blacklisted the company for national security concerns, may moderate the Biden administration’s approach towards aggressively pursuing prosecutions to protect American technology.

Judge Chesney’s ruling centered on the prosecution’s failure to prove that Fujian Jinhua, a state-sponsored Chinese company, misappropriated proprietary data from Micron Technology, the largest memory-chip maker in the US. The alleged misappropriation was accused to have occurred during a manufacturing deal between Fujian Jinhua and Taiwan’s United Microelectronics Corp. (UMC), which had already pleaded guilty to trade-secret theft and paid a $60 million fine in 2020, cooperating with the US in the case against Fujian Jinhua.

This verdict holds substantial weight due to the relative rarity of US prosecutions against Chinese companies in its own courts. While numerous individuals have been convicted of transferring intellectual property to China illegally, Fujian Jinhua’s case marked an uncommon attempt at holding a Chinese company directly accountable.

The case against Fujian Jinhua originated in 2018, amidst the trade war between China under President Donald Trump and the US. It was heavily promoted as a key effort to tackle Chinese espionage within US companies and research institutions. Despite the case proceeding under President Joe Biden, in 2022, the “China Initiative,” a program launched during the Trump era that faced criticism for potentially fueling discrimination against Asian-Americans, was ultimately terminated.

While relations between the US and China, the world’s leading economic giants, remain tense due to concerns surrounding espionage and other issues, a November summit during an Asia-Pacific conference hinted at attempts by both President Biden and Chinese President Xi Jinping to stabilize the relationship.

Micron, in the meantime, appears to have taken steps to appease the Chinese government. These include promises to invest an additional 4.3 billion yuan in its Chinese chip-packaging plant and a visit to China by its CEO, Sanjay Mehrotra. Notably, in December 2021, Micron and Fujian Jinhua reached a settlement, agreeing to drop all legal claims against each other, including a civil suit filed by the US company prior to the criminal case brought by the Justice Department. This settlement came only months after the Chinese government, citing cybersecurity concerns, banned Micron chips from being used in “critical infrastructure.”

The US continues to collaborate with allies to restrict Beijing’s access to the most advanced semiconductors and cutting-edge chip-making technologies. With this recent acquittal, the path forward in the US’s efforts to combat alleged Chinese technological theft remains uncertain, potentially ushering in a period of reevaluation and strategic adjustment.