The Intellectual Property and Commercial Court on Monday ordered three suspects to be held incommunicado over alleged theft of trade secrets related to Taiwan Semiconductor Manufacturing Co’s (TSMC) 2-nanometer chip manufacturing technology.
The case has triggered national alarm, given the sensitivity of the advanced technology, and could undermine TSMC’s competitiveness in the sector. It highlights the intense competition in the semiconductor industry, with chips elevated to strategic resources amid growing geopolitical tension. Any hint of malfeasance could lead to severe consequences.
Prosecutors invoked the National Security Act (國家安全法) and the Trade Secrets Act (營業秘密法) in charging the suspects, who are accused of conspiring to use information to help Japanese chip manufacturing tool supplier Tokyo Electron vie for more TSMC contracts. The main suspect is a former TSMC employee surnamed Chen (陳), who left for Tokyo Electron and allegedly sought aid from former colleagues for information on TSMC technology, prosecutors said. Last week prosecutors said that they were seeking prison sentences of 14 years for Chen, and nine and seven years for the other two defendants.
Tokyo Electron said it fired an employee, presumably Chen, after they were “confirmed to be involved in an incident announced by Taiwanese judicial authorities on August 5.” No information was leaked, the Japanese firm said.
To safeguard Taiwan’s security and industrial competitiveness, the National Science and Technology Council in 2023 listed 22 “critical national security technologies,” including chip manufacturing technologies at the 14-nanometer and more advanced levels.
TSMC’s economic impact on Taiwan is substantial and growing every year. The chipmaker’s annual capital expenditure is expected to be about 5 percent of GDP this year, up from 4 percent in 2023, Quantum International Corp calculations show. TSMC plays a critical role in the nation’s economy, the investment consultancy said.
The trade secret case emerged as TSMC, the world’s biggest chipmaker, prepares to start volume production of 2-nanometer chips in the second half of this year for smartphone customers such as Apple Inc and MediaTek Inc, well ahead of its major rivals, Intel Corp and Samsung Electronics Co. Samsung is reportedly to start volume production of its first 2-nanometer chips in Texas next year after securing a US$17 billion deal from Tesla Inc. Intel is reportedly considering abandoning external sales of 18A technology, which competes with TSMC’s 2-nanometer process, to focus on its 14A technology due to unsatisfactory yield rate and heavy financial burdens. Japanese state-backed chipmaker Rapidus Corp surprisingly announced that it is moving into pilot production of 2-nanometer chips, with mass production slated for 2027.
Given the complexity of semiconductor technology, it would be impossible for TSMC’s rivals to rapidly advance their manufacturing capabilities to 2-nanometer, but information from the firm could help them accelerate the development process, industry analysts say.
The Tokyo Electron case is peculiar, as the former TSMC engineer apparently sought to boost his sales performance, while his former colleagues asked for no financial rewards. Typically, such cases involve former employees stealing secrets before moving to a rival firm, where the information might help them to improve their salary and position.
The behavior of the suspects indicates that they were unaware of the damage they might cause by leaking such sensitive information, showing the importance of enhancing employee education on corporate secrets and national security.
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