Special Report: How China's weapon snatchers are penetrating U.S. defenses
Reuters
By John Shiffman and Duff Wilson 13 hours ago
OAKLAND, California (Reuters) - Agents from Homeland Security sneaked into a tiny office in Oakland's Chinatown before sunrise on December 4, 2011. They tread carefully, quickly snapping digital pictures so they could put everything back in place. They didn't want Philip Chaohui He, the businessman who rented the space, to learn they had been there.
Seven months had passed since they'd launched an undercover operation against a suspected Chinese arms-trafficking network - one of scores operating in support of Beijing's ambitious military expansion into outer space.
The agents had allowed a Colorado manufacturer to ship He a type of technology that China covets but cannot replicate: radiation-hardened microchips. Known as rad-chips, the dime-sized devices are critical for operating satellites, for guiding ballistic missiles, and for protecting military hardware from nuclear and solar radiation.
It was a gamble. This was a chance to take down an entire Chinese smuggling ring. But if He succeeded in trafficking the rad-chips to China, the devices might someday be turned against U.S. sailors, soldiers or pilots, deployed on satellites providing the battlefield eyes and ears for the People's Liberation Army.
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China's efforts to obtain U.S. technology have tracked its accelerated defense buildup. The Chinese military budget - second only to America's - has soared to close to $200 billion.
President Xi Jinping is championing a renaissance aimed at China's asserting its dominance in the region and beyond. In recent weeks, Beijing has declared control over air space in the contested East China Sea and launched China's first rover mission to the moon.
IMMEDIATE THREAT
As China rises to challenge the United States as a power in the Pacific, American officials say Beijing is penetrating the U.S. defense industry in ways that not only compromise weapons systems but also enable it to secure some of the best and most dangerous technology. A classified Pentagon advisory-board report this year, for instance, asserted that Chinese hackers had gained access to plans for two dozen U.S. weapons systems, according to the Washington Post.
But the smuggling of technology such as radiation-hardened microchips out of America may present a more immediate challenge to the U.S. military, Reuters has found. If China hacks into a sensitive blueprint, years might pass before a weapon can be manufactured. Ready-made components and weapons systems can be - and are - used immediately.
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Quite often, sensitive U.S. technology is legally shipped to friendly nations and then immediately and illegally reshipped to China.
A MAN NAMED "HOPE"
The Oakland investigation began in spring 2011. The manufacturer, Aeroflex of Colorado Springs, Colorado, received an email from a man who called himself Philip Hope of Oakland. The man wanted to buy two kinds of rad-chips - 112 of one type and 200 of the other.
The suspicious Aeroflex employees contacted Homeland Security Investigations (HSI), a division of Immigration and Customs Enforcement, which keeps a special counter-proliferation office in the space technology hub of Colorado Springs.
Based on quick record checks, the HSI agents drew a portrait of "Philip Hope." The man was a Chinese immigrant and legal permanent resident, Philip Chaohui He, an engineer for the state of California assigned to a Bay Bridge renovation project. Sierra Electronic Instruments was a start-up run from the one-room office in Chinatown.
The HSI agents concluded that He was buying the rad-chips on behalf of someone else. Someone rich. Someone who couldn't legally acquire them. Probably someone in China - likely the China Aerospace Science and Technology Corp, a state-run entity that operates nearly all of China's military and civilian space projects.
China Aerospace officials did not respond to requests for comment. An official at a Shanghai subsidiary said he was unaware of the He purchases.
The rad-chips He ordered from Aeroflex are not the most powerful on the market, and could not operate a sophisticated military satellite on their own. But experts say they have few uses other than as one of the many components of a sophisticated satellite.
"You wouldn't spend that kind of money on those microchips unless you intended to use them in much bigger satellites," said Alvar Saenz-Otero, associate director of the Space Systems Lab at the Massachusetts Institute of Technology. "They fit the design of a satellite that you'd want to stay in space for a reasonably long time, and therefore are likely small parts of a bigger satellite."
THE AGENTS' DILEMMA
The agents faced the key question that comes in almost every counter-proliferation case: Could they lure the suspect into a sting? If so, would it be worth the trouble?
Undercover operations are time-consuming, expensive and risky. If agents dangled rad-chips in front of the suspect and he got away, the components would probably end up on Chinese satellites. If they delivered the chips and watched him closely, he might lead them to a network traceable to Beijing.
The agents in the case faced another complication: At the time, Aeroflex - the very manufacturer enlisted to help with the sting - was itself under civil investigation for sending rad-chips to China.
Although that investigation was still under way, Aeroflex had already admitted that it sent more than 14,500 rad-chips to China between 2003 and 2008. Aeroflex exported more than half of those chips even after U.S. officials had directed it to stop doing so.
The company declined to comment. But documents show two mitigating factors - Aeroflex voluntarily disclosed the transgressions, and it blamed them in part on misreading complex and sometimes competing Commerce Department and State Department regulations.
Even so, State Department regulators would ultimately conclude: "The exports directly supported Chinese satellites and military aircraft, and caused harm to U.S. national security."
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The L.A. agents followed the cell-tracker to a Best Western hotel south of the city. In the early evening, they located He's Honda sedan in the hotel parking lot. They confirmed that He had checked in, and they settled in for surveillance.
At about 8:45 a.m. on December 11, 2011, He left his hotel room with an unidentified traveling companion and pulled the Honda onto Interstate 110, driving south. Tijuana was two hours away. The HSI agents planned to stop him at the Mexico border.
But after just 3 miles, He pulled into the Port of Long Beach. Then, he used a Transportation Safety Administration pass - a badge he carried for his Bay Bridge repair assignment - to swiftly get through port security.
THE MISSING CHIPS
The fate of the first shipment of 112 radiation-hardened chips - the ones that got away - is unknown. U.S. officials strongly suspect they are either in China or orbiting the Earth aboard one of Beijing's satellites.
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