Risch Puts Chinese Technology Theft in the Crosshairs

The plight of a Boise-based manufacturer caught the new Senate Foreign Relations chair's eye.

Sen. James Risch
AP Photo/Alex Brandon
Jan. 23, 2019, 8 p.m.

The new chair of the Senate Foreign Relations Committee, Sen. James Risch, has kept a tight lid on his plans for the committee. But there's one issue that hits close to home on which the senator is taking an early stand.

Risch plans to take a hard look at reports that a Chinese state-owned company stole trade secrets from Idaho-based chipmaker Micron Technology, Inc., and to hold hearings on the broader issue of technology theft.

“If they can get away with [the theft] in this case, they will use it in other cases,” Risch told National Journal. “ … We’re going to take this seriously, and we’re going to see it through.”

Risch is a stalwart supporter of President Trump’s foreign policy, but he sponsored just one foreign affairs bill last year, commemorating the Berlin Airlift. He prefers to hash out disagreements with colleagues behind closed doors, and is generally soft-spoken—a marked departure from the previous committee chair, former Sen. Bob Corker, who frequently lambasted the administration toward the end of his chairmanship.

Micron is one of the largest employers in Idaho, Risch’s home state, and the sole U.S. manufacturer of dynamic random-access memory, or DRAM, chips. Risch thanked Micron for “the opportunities it provides for Idahoans and for all Americans” in a floor speech last October.

The company is now embroiled in a legal battle with Fujian Jinhua Integrated Circuit Company, a Chinese state-owned competitor that was established to manufacture DRAM, and its Taiwan-based partner, United Microelectronics Corporation.

Last January, United Microelectronics filed a patent-infringement lawsuit against Micron. Risch called the case “disturbing,” saying that UMC had in fact stolen that technology from Micron.

“I mean, you had Chinese nationals who stole their trade secrets and stole their patents, and went to China and patented them, and then proceeded to sue them for using their own technology and their own work in China,” Risch said. “It’s a state-owned entity suing in front of a state-owned court in front of a state-owned judge. That’s just not the way you do business in a civilized society.”

Last fall, the Commerce Department banned exports to Fujian, and the Justice Department charged three UMC employees with funneling Micron trade secrets to Fujian. The criminal indictment is the first in the Justice Department’s new “China Initiative,” which is designed to prioritize cases of trade-secret theft.

Risch said he has discussed the topic of technology theft with the Chinese ambassador, and has spoken with Trump and officials in the departments of State, Commerce, and Justice about crafting a “whole of government” response to technology theft. Micron has held regular briefings about the case with Risch and his fellow Idaho Republican, Sen. Mike Crapo, according to a source familiar with the discussions.

“I think it’s important for us to bring the Chinese to a clear understanding of how [the United States] got to where we are,” Risch said. “We didn’t do it by cheating; we didn’t do it by bribery. We did it by innovating, and … they need to believe that it can be done that way.”

Many defense experts view the survival of the microchip industry in the United States as a national security imperative. The Pentagon is wary of relying on foreign suppliers for microprocessors, which are used in everything from missile-defense systems to so-called “smart weapons.”

But the domestic industry is fragile. The cost of manufacturing smaller and faster chips has risen dramatically in the past few decades, and profit margins are razor thin.

The production of microchips is “very similar to agriculture,” said Dan Hutcheson, CEO of VLSI Research, a microprocessor research firm. “You plant a field, you fertilize the field, and then you’re dependent on how much crop you get out of it. If you’re a good farmer, you get more crop … and if you have some secret fertilizers, you get a lot more crop. And those are the big things that Micron wants to protect.”

While profit margins have sunk, the cost of opening new plants has risen to between $10 billion and $15 billion for a single facility, according to industry experts. The resulting consolidation left just one DRAM manufacturer standing in the U.S.—Micron.

The “worst-case scenario” for Micron and other domestic chipmakers, said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics, would be if Chinese companies ate up market share “based on subsidies and the illicit obtaining of the plans.” But Chorzempa and other analysts stressed that more emphasis should be placed on the lack of domestic competition, not just on China’s theft of proprietary technology.

Derek Scissors, a resident scholar at the American Enterprise Institute, said the Pentagon could invest seed money into research and development of microprocessor technology to lower the entry costs for newer firms.

“I absolutely agree we need more actors in this space, more competition,” Scissors said. “The government role is obviously not to set up a company, but … [by] being involved in research, can make it easier for the private sector.”

Risch, meanwhile, wants to “keep the pressure” on China to stop the theft of intellectual property—through tariffs, if necessary.

“This memory-chip technology is something that is very important for [China] to achieve their goals in 2025, and they know that they’re short in that area,” he said. “Now, when you have a shortage like that … you go out and make it up by innovating, by inventing, or by leasing technology that other people own and paying them for it. But you don’t go and steal it.”

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