China Espionage Hurting U.S. Companies

By Russell D. Vines
Posted in Security
On March 21, 2012

Bloomberg, Businessweek, the New York Times, and several other news outlets have been on the case of China's Sinovel Wind Group's use of corporate espionage to gain a competitive advantage over the United States and other countries. Last April, Sinovel stopped purchasing wind turbine control software from American Semiconductor Corp. for no apparent reason. By June, AMSC had figured out why: Sinovel had cracked AMSC's proprietary turbine management source code and didn't need AMSC any more.

In what's been called "the greatest transfer of wealth in history," China's government-sanctioned spy agencies have been targeting governmental and industry intellectual property to gain market share, without having to go through the all the hassle of R&D.

Standing in contrast to the common Russian or Eastern European hack, which is focused primarily on direct financial transfer, the Chinese have focused on specific information they need to operate and manage high-tech industries.

A very comprehensive article about the extent of the hacking can be found at Bloomberg: http://bloom.bg/GI6VGe

In AMSC's case, the fallout from the IP theft was major: its stock dropped 40% in one day. AMSC has filed lawsuits in Chinese courts, so it will be interesting to see how this case runs its course. But it's not likely U.S. companies will see real relief any time soon.