Engineer faces 219 years in prison for smuggling US military chips to China

The chips have been used by DARPA and the US Air Force.
Written by Charlie Osborne, Contributing Writer

An electrical engineer faces up to 219 years in federal prison after being found guilty of conspiring to smuggle military-grade semiconductor chips to China. 

On Tuesday, the US Department of Justice (DoJ) said that Yi-Chi Shih, a part-time Los Angeles resident, attempted to secure semiconductor chips used in US military applications in order to transfer them to Chinese associates. 

The 64-year-old was subject to a six-week trial in a Los Angeles, California federal court. 

Prosecutors alleged that Shih, alongside co-defendant Kiet Ahn Mai of Pasadena, California, conspired to gain access to a sensitive system belonging to an unnamed US firm which manufactured semiconductor chips and Monolithic Microwave Integrated Circuits (MMICs). 

The victim company's PC systems were accessed fraudulently after Mai posed as a potential customer, giving Shih the opportunity to obtain custom processors. While the firm in question believed the chips would only be used in the United States, Shih transferred the products to the Chengdu GaStone Technology Company (CGTC), a Chinese firm building an MMIC manufacturing plant. 

Evidence suggested that Shih managed to "defraud the US company out of its proprietary, export-controlled items, including its design services for MMICs."

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US prosecutors say the victim company's designs have been used in both commercial and military applications. Customers include the US Air Force, Navy, and the Defense Advanced Research Projects Agency (DARPA). 

The semiconductors have been used in missiles, missile guidance systems, fighter jets, radar applications, and "electronic warfare."

No export license was sought, likely because such a request would be rejected. The scheme was uncovered and investigators realized that Shih was the president of CGTC.

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His company had previously been placed on a Commerce Department watchlist for "involvement in activities contrary to the national security and foreign policy interest of the United States -- specifically [...] the illicit procurement of commodities and items for unauthorized military end use in China."

On June 26, Shih was found guilty of 18 charges by a federal grand jury, including conspiracy to violate the International Emergency Economic Powers Act (IEEPA), mail and wire fraud, making false statements to a government agency, and conspiracy to gain unauthorized access to a protected computer to obtain information.

A sentencing hearing is yet to be scheduled. The range of charges could see Shih face a maximum sentence of 219 years in federal prison, and the judge presiding over the case is also considering the prosecution's request for hundreds of thousands of dollars to be made forfeit. 

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Shih's co-conspirator pleaded guilty to one count of smuggling and will be sentenced in September where he faces up to 10 years in prison. 

"This defendant schemed to export to China semiconductors with military and civilian uses, then he lied about it to federal authorities and failed to report income generated by the scheme on his tax returns," said US Attorney Nick Hanna. "My office will enforce laws that protect our nation's intellectual property from being used to benefit foreign adversaries who may compromise our national security."

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