Semiconductor IP News and Trends Blog

World Awakens to Cost of IP Thefts

The EDA-semiconductor community has long understood the damaging cost of stolen IP by major emerging countries. In recent years, these IP thefts have expanded to other critical markets.

The discovery – or at least recent public recognition – of suspected state-approved hacking of all sorts of US military and corporate intellectual property will change the landscape of global business relations. In the world of leading edge SoC development, it may necessitate greater government involvement in IP-related design and manufacturing. While this involvement is a natural reaction to the loss of precious, job creating R&D, it will affect the business side of the global semiconductor market.

Why might this change be coming? Reports from several groups suggest that China has been the source of a vast, concerted effort to steal a wide variety of US intellectual property. China’s suspected involvement was recently documented in a report by global security firm McAfee. The report highlighted hacking intrusions from “Operation Shady RAT (remote access tool),” in which the intruders sought sensitive data on US military systems, satellite communications, electronics, and natural gas companies, among other industries. More than half of the compromised organizations were in the US.

Dmitri Alperovitch, McAfee’s vice president of threat research, has been quoted as saying that such thefts result in an unprecedented, “massive transfer of wealth in the form of intellectual property.”

What is the estimated dollar amount of the loss of IP and investment opportunities across all these key markets? Scott Borg, chief economist at the U.S. Cyber Consequences Unit, a research group, assessed the annual loss to be between $6 billion to $20 billion, with the oil industry suffering the highest losses.

As major US industries struggle to deal with the serious theft of IP, they may want to revisit how the semiconductor market has dealt with such intrusions. For example, the EDA-IP industry has been dealing with the theft problem well before it grabbed national attention by other industries. Security for IP has been a concern since the early 2000s. Various twists to the mere theft of IP have also been considered. For example, the 2006 Design Automation Conference (DAC) examined the possibility of a foreign semiconductor foundry adding a bit of RTL to specific chips – perhaps in the command and control structure – was a major topic of concern. Such innocuous portions of RTL code could be used to disable an aircraft’s communication during a critical engagement in a combat situation. (see, “Foreign Fabs and Killer Apps“)

One expects military and corporate IP to be stolen by emerging markets. The temptation is just too great. Also, the legal mechanisms to deal with the theft of IP are still being formed by many developing nations (see, “DAC Panel Explores IP Theft in Global Markets“)   But as more and more industries are effected, the problem becomes more serious. The future of global partnerships in important high-tech industries may be jeopardized.

As the first high-tech industry involved with these issues, the community of semiconductor IP and EDA may have much to offer other markets in terms of innovative technologies and process solutions. All industries will need to work together with the government to combat this problem.