The Suwon Prosecutor's Office on Thursday filed indictments against nine individuals and two companies for stealing Samsung's curved-display technologies and selling them to a Chinese firm. The people in question were employees of Toptec Co Ltd, a firm that produced machines Samsung used to manufacture some of its mobile displays, including the ones with curved edges implemented into the last several generations of the technology giant's Android flagships. Three of the defendants were arrested, including Toptec Chief Executive Officer Lee Jae-hwan, whereas another two who were accused of being complicit but worked for another firm from China avoided having any official charges dropped on them.
The company responsible for the leak signed a variety of non-disclosure agreements meant to prevent Samsung Display's 3D Lamination technology for curved OLED panels secret but ultimately ended up selling schematics and other sensitive materials to an unnamed entity from China, the indictment reads. The defendants are alleged to have established a shell company to conduct their transgressions which sold the drawings and other technical documentation in question for the equivalent of some $13.8 million. While the South Korean government usually doesn't get involved in trade secret theft cases, this particular situation is an exception as Samsung created its 3D lamination techniques under the designation of a national core technology which hence falls under the protection of Seoul. Its display-making arm claims it invested over $134 million to fun a 38-strong team of engineers over six years in order to develop the technology.
The information on when exactly did the defendants allegedly transfer the stolen schematics to China has yet to be disclosed, though the prosecutors did accuse them of using burn phones, fake names, and personal email addresses in order to attempt avoiding leaving official records of their transgressions. The case is expected to take around a year until it reaches a first-instance verdict. Toptec is denying any wrongdoing and claims it will remain fully cooperative with competent authorities in order to clear its name.
Background: Samsung first commercialized curved-edge mobile OLED panels in 2014 when it released the Galaxy Note Edge which featured a single such flexible panel side. The firm promptly moved to dual curved edges which it continues to use as one of the main unique selling points of its Android flagships. Smartphone manufacturers from China have only recently transitioned to OLED panels in the non-premium segment of the market after spending years with LCD modules. Compared to the latter, OLED displays provide better energy efficiency and are able to deliver an infinite-contrast image due to the manner in which they generate true blacks – as every pixel on an OLED panel is lit individually, such solutions deliver black image sections by simply not lighting up certain viewing areas.
Today, Samsung controls more than 95-percent of the global OLED market for small- and mid-sized panels used by smartphone and tablet manufacturers. The increased demand from China boosted the company's profits over the last several years and combined with a rise in chip sales allowed Samsung to reach unprecedented highs, posting one record-breaking quarter after another. The firm's pioneering technologies that allowed it to deliver curved-edge mobile displays have evolved to the point that it's now almost ready to commercialize the first mainstream foldable smartphone. Rumored to be called the Galaxy F or Galaxy Flex, the Android handset in question is expected to be officially introduced at Barcelona-based Mobile World Congress in late February, sporting an unconventional Infinity Flex panel Samsung already unveiled last month.
Every new Android flagship from Samsung released over the last half a decade pushed the boundaries of mobile display technologies and even when its designs were outdone, they were usually temporarily surpassed by panels which it still manufactured for another party, which is what happened last year with the Super AMOLED module of Apple's iPhone X. Curved-edge displays are still a rarity in the smartphone industry outside of Samsung's portfolio and the only other major original equipment manufacturer that commercialized them so far is Huawei with its Mate series of high-end Android phablets. The South Korean prosecutors gave no indication of who the supposed China-based buyer of Samsung's stolen technologies is but that information is likely to become public knowledge as the case progresses.
Toptec's offices were raided by prosecutors in the Far Eastern country in mid-September as part of an incestigation that led to today's indictments. On that occasion, the firm denied leaking trade secrets and attributed the allegations to communication issues with clients, claiming the thereof were of little to no consequence. Prior to the emergence of trade secret theft allegations, Toptec was struggling to calm investors who were vary of the firm's lack of investments and a declining revenue.
Impact: While the alleged buyer of the curved-screen technologies stolen from Samsung has yet to be named, there's little doubt that the South Korean company won't hesitate to reveal it when the case moves to the court of law, as suggested by its established track record of patent litigation which saw it clash with some of the world's largest technology companies such as Apple. Should the prosecution successfully prove Samsung's trade secrets were stolen and sold to the highest bidder in China, the company would have a legal basis to pursue an injunction against anyone who tries to commercialize them. That ability still wouldn't extend to the Chinese market itself which technically has intellectual property laws but has a judicial system that applies them selectively, only when it benefits domestic companies at the expense of their foreign rivals, critics often argue. The said protectionist policy is also what partially fueled the ongoing trade war between China and the United States. Should the newly started litigation confirm Samsung's stolen technologies ended up in China, that development would likely be used by Washington as yet another argument against an open collaboration with the Far Eastern country. The Trump administration's current relations with Beijing are rather shaky; it was just last month that Vice President Mike Pence reiterated accusations of China stealing American technologies.