14 ex-Huawei employees handed down prison sentences in China — accused face up to six years for taking 'chip-related business secrets' with them to form startup Zunpai

China’s courts take tech secret pilfering seriously, if one of its homegrown companies appears to be the victim. The South China Morning Post (SCMP) reports that a Shanghai court has sentenced 14 former Huawei employees, who were accused of taking a number of “chip-related business secrets” with them, when they scooted off to form a new startup called Zunpai Communication Technology.

Apparently, the precise punishment to be meted out upon the accused remains uncertain, as the verdict is yet to be published online. However, sources indicate that the ex-Huawei engineers will face financial penalties and up to six years in jail.

The above case is reportedly a talking point in China. The topic of Intellectual property theft, its impacts on competitive industry, and on the people who work at these companies, have been thrust into the public psyche. However, the plaintiff in this case, Huawei, has yet to comment.

Ex-Huawei engineers form Zunpai

Zunpai was founded in 2021 by Zhang Kun, a former researcher at HiSilicon. Zhang had left Huawei in 2019, and in the interim, apparently headhunted talent from his old employer, with some success.

It is alleged that Zhang managed to attract some of his old colleagues over to Zunpai with high salaries and attractive stock options. But there’s no such thing as a free lunch, and these potential employees were also reportedly expected to copy secrets before they quit Huawei.

Ex-Zunpai engineers form chain gang

Huawei didn’t have its head in the sand regarding this matter and, according to the SCMP, initiated legal proceedings in August 2023. Shortly after this, in December 2023, Shanghai police arrested 14 individuals for activities infringing upon chip technology secrets. At the same time, 95 million Chinese yuan ($13.1 million) worth of Zunpai's assets were frozen.

Investigations by law enforcement indicated that 40 technologies in use by Zunpai were almost identical to those owned by Huawei / HiSilicon. A statement by the police, shared by the SCMP, talked about the importance of supporting the work of legitimate companies and supporting fair competition.

Huawei was recently in the headlines for opening an impressive new 2,600-acre R&D center in Shanghai. However, it has been far from immune to accusations of shady business practices like sanctions busting, installing back doors in its devices, and – most pertinently today – poaching talent and acquiring stolen tech from rival tech companies.

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