Netherlands’ ASML – a victim of Chinese corporate espionage

In its annual threat assessment, Netherland’s intelligence agency had warned that China is targeting tech companies in the Netherlands for intellectual property theft, just like it does in other countries.

In a significant development, Netherland’s ASML disclosed, it has become a victim of Chinese corporate espionage. Luckily the perpetrators who had stolen information did not manage to steal the blueprint for the lithography machines that have made it a world leader in semiconductor equipment.

The perpetrators had taken “large files” on memory sticks from its Silicon Valley software subsidiary that develops software for machine optimization. Ever since it detected the theft of intellectual property, it has taken action to make such thefts significantly more difficult.

The Dutch company has welcomed a Sino-European agreement, which was signed earlier this week, in which Beijing promised that it would no longer force foreign companies to share sensitive know-how when operating in China.

“Can we prudently do business in China? Yes of course. This was a rotten apple,” said ASML in a statement.

ASML’s sales to China more than doubled to $2 billion (1.8 billion euros) in 2018 as Beijing drives growth of its domestic semiconductor industry, now accounting for about a sixth of ASML’s total sales.

ASML did not clarify whether Chinese employees / Chinese government were involved in the theft, as alleged by Dutch business daily Financieele Dagblad (FD).

ASML did say however, the information related to this incident was available in public U.S. court documents relating to a case it won in November 2018.

According to documents from the Santa Clara, California Superior Court., six former ASML employees, all with Chinese names, breached their employment contract by sharing information on ASML software processes with XTAL.

In 2015, ASML had disclosed a breach of its computer systems; the damage was from the hack was limited due to its timely detection and subsequent action.

With the news reaching the market, its shares slipped 1.2% by 0944 GMT and sank to the bottom of a flat European technology index.

According to Financieele Dagblad’s report and according to its own investigation, the theft of its intellectual property had resulted in hundreds of millions of dollars in losses.

“The FD’s investigation found XTAL’s Chinese parent company Dongfang Jingyuan has ties with the Chinese Ministry of Science and Technology”.

The U.S. court had awarded ASML $223 million in damages and XTAL filed for bankruptcy a month later.

The Dutch intelligence agency has included warnings in its annual threat assessments for the past several years, saying that China is targeting tech companies in the Netherlands, as it does in other countries, for intellectual property theft.

The Dutch intelligence agency AIVD did not immediately respond to a request for comment on Thursday.

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