SKorea Alleges Factory Design Espionage

South Korean prosecutors said Thursday they have arrested and indicted a former LG Electronics employee on charges of illegally providing plasma display manufacturing technology to a Chinese company.

LG Electronics Inc., the world's third-largest seller of plasma televisions and panels, said the suspected industrial espionage could cost it $1.4 billion in lost sales.

The employee, a man prosecutors identified only by the surname Jung, allegedly gave the technology to COC, a company based in the Chinese province of Sichuan, said a prosecutor on the case. He spoke on condition of anonymity because he was not authorized to speak to media.

The prosecutor said Jung, who was arrested last month, indicted Wednesday and remains in custody, held onto a computer hard drive that contained designs and other information about an LG plasma display panel factory after he quit the company in 2005.

Jung joined COC in February 2007 as a technology adviser and is accused of sharing proprietary information that belonged to LG with his new company, the prosecutor said.

Also indicted were another former LG employee and a current employee, who both allegedly assisted Jung after he joined the Chinese company, he said.

If convicted on the charges _ violating South Korea's fair competition and sales secrecy laws _ the three each face up to seven years in prison, he said.

South Korea's Yonhap news agency, quoting the prosecution office, reported that the Chinese company offered Jung compensation of $300,000 a year plus an apartment and a car.

COC, based in the city of Mianyang in Sichuan, said it is a venture involving Sichuan Changhong Electric Co., China's biggest television maker, and South Korean plasma display maker Orion PDP Co.

A manager in CO's main office who identified himself only by the surname Gao refused comment "until we clarify the situation."

Analysts say Chinese companies have been trying to catch up with South Korean and Japanese rivals in the plasma display industry by hiring South Korean talent.

"This is the fastest way to get technology," said Jusy Hong, a Tokyo-based industry analyst with Displaybank, a South Korean research and consulting firm.

Kim Kwang-nyun, a project manager at Orion PDP in South Korea, referred a request for comment to COC.

LG Electronics' spokeswoman Judy Pae said the information allegedly passed to the Chinese company was not "core technology" but rather related to the process of establishing a plant.

"It's very important know-how," she said. "It would benefit any company in setting up a manufacturing process."

Pae said the potential sales loss was an estimate for a three-year period if the Chinese company ends up using the technology to manufacture plasma displays.

LG Electronics is also the world's fifth-largest producer of mobile phones and a leading manufacturer of home appliances including refrigerators and washing machines.

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Associated Press writers Kwang-Tae Kim in Seoul and Elaine Kurtenbach in Shanghai, China, contributed to this report.