Taiwan Arrests TSMC Employees for Alleged Tech Theft

Major Semiconductor Company Investigates Trade Secret Theft

Taiwanese authorities have detained three current and former employees of the world’s largest chip manufacturer, Taiwan Semiconductor Manufacturing Company (TSMC), for allegedly stealing trade secrets. Prosecutors announced this development on Tuesday, indicating that law enforcement officers had questioned several suspects and witnesses late last month. During these investigations, their homes were searched, and three individuals were detained due to "serious suspicions of violating national security laws," according to the intellectual property branch of the Taiwan High Prosecutors Office.

TSMC is responsible for producing more than 90% of the world’s advanced semiconductor chips, which are essential components in smartphones, artificial intelligence (AI) applications, and even weapons systems. The company serves major clients such as Apple and Nvidia, making its technology a critical asset in the global market.

Following an internal investigation, TSMC raised concerns with authorities about the potential illegal access of its “core technologies” by both former and current employees. The prosecutor's office has stated that it will investigate the motives behind the alleged theft of trade secrets and whether TSMC’s proprietary information was leaked to other parties. This marks the first case of its kind since Taiwan strengthened its national security law in 2022 to protect key technologies.

According to Nikkei Asia, TSMC had previously fired staff suspected of illegally obtaining business secrets related to the manufacturing technology for the company’s 2-nanometer chip. This is the most advanced processor in the semiconductor industry and is expected to enter mass production this year.

Super-advanced semiconductor chips are challenging to produce due to the high cost of development and the specialized knowledge required. As a result, much of the production is concentrated among a few suppliers, including TSMC, Intel, Samsung, and Rapidus.

TSMC discovered the potential trade secret leak after detecting unauthorized activities during routine monitoring. In response, the company took strict disciplinary actions against the involved personnel and initiated legal proceedings. "Such violations are dealt with strictly and pursued to the fullest extent of the law," the company stated in a public statement.

Taiwanese local media reported that a former TSMC employee now works at Tokyo Electron Ltd., a top chip manufacturing equipment supplier. Investigators reportedly raided the Japanese firm’s Taiwan office. On Thursday, Tokyo Electron confirmed it had dismissed an employee from its Taiwan subsidiary who was involved in the case and stated that the company was cooperating with authorities.

"As of now, based upon the findings of our internal investigation we have not confirmed any evidence of the respective confidential information shared to any third parties," the company said in a statement.

If proven true, a breach of TSMC’s key trade secrets could have significant national security implications for Taiwan. Such a breach might reduce the technological lead that TSMC holds over its competitors in advanced chip manufacturing.

TSMC’s technological capabilities are often cited as a reason for the belief that Taiwan’s global dependence on its semiconductors acts as a “silicon shield.” This is seen as a deterrent against a potential Chinese invasion and as leverage in global diplomacy.

The tightened legislation, which increased penalties for the theft of core technologies and banned their use in foreign countries, came after years of incidents involving Chinese companies obtaining chip manufacturing knowhow by poaching Taiwanese engineers.