Magazine article Insight on the News

PRC Espionage Leads to `Terf' War: Investigators Say China Placed Students in American Universities to Gain Secret Information about an Exotic Material with Valuable Industrial and Military Uses. (Nation: Military Technology)

Magazine article Insight on the News

PRC Espionage Leads to `Terf' War: Investigators Say China Placed Students in American Universities to Gain Secret Information about an Exotic Material with Valuable Industrial and Military Uses. (Nation: Military Technology)

Article excerpt

The U.S. Navy spent millions of dollars to develop Terfenol-D in the early 1980s, and intelligence experts estimate that the People's Republic of China (PRC) has devoted extensive resources to try to steal it. INSIGHT has learned that these PRC efforts have paid off.

The spy target is an exotic material made up of two types of rare-earth metals called lanthanides, terbium and dysprosium, plus iron (FE). The NOL stands for Naval Ordnance Laboratory. Hence the name Terfenol-D.

Those who have worked with this exotic material call it almost magical. "It changes shape when you apply a magnetic field to it," says Jonathan Snodgrass, the chief scientist at Etrema Products Inc. of Ames, Iowa. Until recently, Etrema was the only U.S. company authorized by the Navy to work with Terfenol-D, following its development at the Department of Energy's Ames Laboratory, which is managed by Iowa State University. Scientists and engineers say Terfenol-D is a technology of the future with many commercial and industrial uses. But the Navy has its own uses for Terfenol-D, including high-tech sonar devices in U.S. submarines to detect and track enemy vessels. That is why the Department of Defense (DoD) jealously guards the process that produces this substance.

But a burgeoning demand from commercial markets for the material has caused Terfenol-D to be classified as a "dual-use technology." Since the Department of the Navy invented it, the DoD is allowed to say who can use it. So, in order for a U.S. company to export a product that contains even a tiny amount of Terfenol-D, that company must have permission from the DoD in the form of an export license. Even if such a license is granted, the DoD places strict limits on the exporter to ensure absolute control of the material. Although possession of some of the material would not by itself reveal the process, the DoD wanted to limit any opportunity for a potentially hostile government to get close inspection of the substance.

Despite the U.S. government's best efforts to keep secret the process that creates Terfenol-D, the PRC was able to obtain enough information to develop a crude version. Some U.S. officials tell INSIGHT that China was able to obtain information about the secret process by placing "students at Iowa State University to work in and around the Ames Laboratory." INSIGHT has learned that an active investigation is under way by U.S. government agencies including the FBI, which declined to answer questions posed by this reporter. INSIGHT has confirmed that the government also has documented other PRC attempts to obtain the Terfenol-D process by espionage, spelled out in a classified document.

The Ames Laboratory confirmed that it had employed PRC students who attended Iowa State University, but it was unable to provide any details by press time. Government officials are concerned that technology transfers are occurring in the context of academic exchanges between scientists and students working to solve scientific problems. It is during such "problem-solving discussions," experts say, that students from China or elsewhere are able to gain information that they take back "to their home countries and advance technologies there that often wind up in weapons systems."

INSIGHT also has obtained information that U.S. government analysts say shows continued and aggressive efforts by the PRC to "improve its Terfenol-D program" and "sell a copycat version on the international market."

Gansu Tianxing Rare Earth Functional Materials Co. Ltd. (TXRE) was founded in the PRC in June 1998, according to company literature, which also claims that TXRE is a private company. It says TXRE perfected its own technique to produce "Tb-Dy-Fe series giant magnetostrictive materials of high performance." That is, Terfenol-D.

An official familiar with the U.S. investigation tells INSIGHT "that it is unclear precisely when the PRC came up with Terfenol-D," or where they got it, but INSIGHT has confirmed through sources who did not want to be identified that the computer system of Etrema Products, the Navy contractor, was hacked approximately two years ago. …

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