South Korea's revised Criminal Act took effect on September 13, expanding the country's definition of espionage beyond "enemy states" to cover any foreign country or organized entity — a change that carries prison sentences of three to 30 years and is aimed squarely at protecting the semiconductor technology that underpins the global AI hardware supply chain.
It is the first major overhaul of the law in 73 years, according to reporting from Reuters, Bloomberg and the Financial Times. The old statute, untouched for more than seven decades, treated espionage in practice as a North Korea problem, leaving prosecutors with a narrow toolkit when foreign companies recruited Korean engineers to carry industrial know-how abroad. For more context on this story, see our ongoing more AI stories.
Why Now: A Record Wave of Technology Leaks
The timing reflects a deteriorating reality for Korean chipmakers. In 2025, South Korean police reported a record 33 technology leak cases, with more than half linked to China, and the semiconductor sector was the primary target.
One case stood out: five former Samsung Electronics employees were indicted for allegedly transferring critical DRAM manufacturing technology to ChangXin Memory Technologies, the Chinese memory chip firm known as CXMT. Samsung Electronics and SK Hynix together dominate the global memory market, holding vast shares of both DRAM and NAND flash production, making their process knowledge among the most valuable industrial secrets in the world.
Under the previous framework, prosecutors pursuing such cases had to rely on trade secret statutes that carried lighter penalties and less deterrent force. The revised law removes that constraint: anyone who obtains, collects, or discloses state and industrial secrets on behalf of any foreign entity now faces a minimum of three years behind bars, with a maximum of 30.
From Corporate Dispute to National Security
The amendment creates a new offense covering espionage conducted for a foreign country or an equivalent organization, Reuters reported, while existing provisions covering espionage that benefits an "enemy state" remain in place.
The deeper shift is philosophical. South Korea is no longer treating technology theft as a private dispute between companies to be settled in civil court. It is now a national security matter — a reclassification that changes the investigative resources, intelligence involvement and political will deployed when a leak is detected.
The National Intelligence Service has been vocal about the risk, warning that technology outflows could erode the competitive advantages of domestic firms precisely when global demand for advanced memory is surging, driven in large part by AI data center construction that consumes memory at unprecedented scale.
The stakes extend directly into the AI hardware supply chain. The memory segment at the center of these leak cases is a cornerstone of AI infrastructure: high-bandwidth memory, the specialty of Korean manufacturers, sits alongside every major AI accelerator shipped today. That makes the preservation of process know-how a matter of economic security rather than a purely commercial concern, and it explains why the government was willing to attach criminal-grade penalties to what was once handled as an intellectual property dispute.
The $880 Billion Bet Behind the Legal Shield
The law is one piece of a much larger national strategy. South Korea has outlined an $880 billion plan to cement its position as a global semiconductor hub, and protecting process technology is central to that ambition. Parliament passed the revision on February 26, 2026, giving companies and prosecutors roughly six months to prepare for the new regime.
China's domestic chip ambitions add urgency. Firms like CXMT and Yangtze Memory Technologies have been aggressively building capacity in the memory segment. While US export controls have slowed their access to the most advanced manufacturing equipment, human capital and process knowledge represent an alternative pathway to closing the technology gap — exactly the pathway the new law is designed to block.
Diplomatic Fallout Likely
Beijing is unlikely to view the legislation as a neutral legal reform. With more than half of the reported leak cases linked to Chinese entities, Chinese officials may interpret the law as targeted, adding another friction point to an already complicated technology relationship. South Korean chipmakers, for their part, operate extensive manufacturing facilities inside China, and any escalation in rhetoric around technology security puts those operations under scrutiny from both governments.
For the global AI industry, the law is a signal of where the battleground is moving. As export controls restrict hardware flows, the contest is shifting toward the tacit knowledge held by engineers — and governments are now willing to treat that knowledge as a strategic asset worth criminal-grade protection.
South Korea's move will likely be studied closely in Washington, Brussels, Tokyo and Taipei, where policymakers face the same calculus: how to protect the industrial secrets that keep domestic firms competitive in AI hardware without choking the movement of talent and expertise that the industry depends on.
For more coverage of AI policy, chips and the regulation of the technology supply chain, follow the latest AI news as governments worldwide respond.
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