TSMC 2nm Trade Secrets Probe: Fresh Developments Revealed
More evidence regarding the national security investigation on a trade secret espionage case initiated by Taiwan Semiconductor Manufacturing Co. (TSMC) has come to light.
According to local media reports, the suspects were arrested red-handed at a Starbucks near one of TSMC’s Hsinchu fabs when one of them was using his smartphone to take snapshots of the confidential information shown on the screen of a TSMC laptop.
Nine engineers were involved in this alleged crime. An engineer surnamed Chen, who started working for TEL as an equipment engineer after leaving TSMC, reportedly orchestrated the action with engineers in his network, who used their phones to photograph confidential process diagrams displayed on screens. Two other engineers, surnamed Wu (吳) and Ko (戈), provided more than 700 and nearly 300 images of process technology, respectively. Wu and Ko worked at Fab 20, where the foundry giant’s 2nm production lines are located.
Several other TSMC engineers also supplied a single-digit number of less-sensitive process diagrams; their offenses were considered less severe, so they were not subject to pretrial detention.
A source who seems to be familiar with the three suspects shared information on Threads, saying that Wu suddenly became rich and purchased two houses recently, one of which is worth NT$40 million (around US$1.3 million).
Another report said Chen told TSMC that he had handed all the photos to his supervisor (also a former TSMC employee, surnamed Lu) at TEL and had not leaked the confidential photos to a third company. TSMC wanted to check what the supervisor controlled over its trade secrets and contacted TEL’s legal affairs department, but did not get substantive support, so it decided to resort to legal enforcement and initiate the National Security investigations. Lu has not been arrested or detained by the prosecutors so far.
Although the suspects have been dismissed by their current employers and may face rejection across Taiwan’s semiconductor industry, they could still attract interest from foreign competitors eager to make breakthroughs in advanced chip manufacturing. Given precedents like Liang Mong-Song — a former TSMC executive who went on to play a key role in Samsung and later aided China’s semiconductor push — the risk is real. It would be a serious concern if individuals cast out by Taiwan’s chip sector were recruited by companies such as Samsung, Intel, Rapidus, or even Huawei and SMIC, potentially accelerating the global rivalry in next-generation process technologies.
Industry espionage escalated to a national security level
TSMC fired several employees and initiated legal action due to violations concerning sensitive information related to cutting-edge chip technology, according to a Nikkei Asia report earlier this week. The former employees allegedly tried to obtain proprietary information on 2-nm chip development and production, which is the most advanced in the world and slated for mass production this year.
TSMC detected these "unauthorized activities" during routine monitoring, leading to the discovery of "potential trade secret leaks." The company has taken "strict disciplinary actions" and initiated legal proceedings. This case has potential national security implications, as 2-nm chip technology is considered a "National Core Critical Technology" under Taiwan's National Security Act of 2022. This is the first significant case involving chip technology to be investigated under this act.
Article 8 of the National Security Act stipulates that economic espionage is punishable by up to 12 years in prison and a fine of NT$100 million.
The law treats unauthorized disclosure, use, or reproduction of national core critical technologies—such as semiconductor processes more advanced than 14nm—as a serious legal violation with national security implications. This marks one of the first major investigations under these new protections, reflecting the enormous strategic and economic value attached to such advanced chipmaking know-how. The investigation is still ongoing, including whether there were any external links or foreign actors involved in the exfiltration attempt, according to Trendforce.
Investigations are ongoing to determine the intent behind obtaining the information, the scope of the leak, and whether additional parties were involved. TSMC has stated it has a "zero-tolerance policy" for actions compromising trade secret protection and is committed to safeguarding its core competitiveness.
United Daily News (UDN) reports that prosecutors raided six locations, including Tokyo Electron's office, between July 25-28, detaining three engineers. One of the suspects is a former TSMC and TEL employee, while the other two were still employed by TSMC when the incident came to light, reportedly in connection with TSMC's 2nm chip technology.
TSMC faces thousands of external cyberattacks daily from all directions, with hackers attempting to breach their defenses and steal critical process technology information. Consequently, TSMC has invested heavily in cybersecurity protection. This includes not only hardware and software monitoring but also using AI for additional protective measures.
TSMC trade secrets and related undisclosed confidential information are protected under the Proprietary Information Protection (PIP) guidelines in the best interest of the company, shareholders, employees, customers, and vendors, according to the TSMC website.
TechView Voice, citing engineers, reports that TSMC’s AI monitoring tools can simulate human behavior when using computers or viewing data to determine if someone is potentially covertly photographing database information with a phone when working remotely, indicating a “possible action of stealing confidential data."
The last time TSMC pursued espionage charges against a competitor was in 2004, in a case against China's SMIC. Currently, their 2nm technology is vital for TSMC to retain its dominant position in advanced chip manufacturing. Rivals such as Samsung, Rapidus, and Intel are aggressively working to close the gap and capture a share of this highly competitive market.
Editor’s Note:
The story continues to develop. Authorities are expanding the investigation to determine whether any foreign entities were involved or benefited from the leak. TSMC has reaffirmed its zero-tolerance stance on trade secret violations.
TEL is Tokyo Electron
Nice reporting! Thanks.
Gotta comment...pls see my other note to your initial article for background. Taiwan/Chinese Taipei is not a signatory to most (likely ALL if my files catch 'all') of the main multilateral export control regimes. This means, in theory, there are no controls on their exports and whether they can receive imports depends on how individual nations might manage their own national company's exports. In general, for Semi, dual-use commodities the US EAR (Export Administration Regulations) and, for "Europe+", the similar WA (Wassenaar Arrangement) would apply.
Recall: Taiwan, under the One China policy, implemented under the US Nixon Admin, during the "Communist nations' fall-out", would be subject to the same export controls as (mainland) China: No Defense Exports and the same licensing requirements for dual-use. (There has been an "n-3 policy", meaning three nodes back from the current production devices "gate lengths" (or related design rules) export controls apply.)
Taiwan holds the planet's most advanced production and R&D in Semi.
Taiwan, however, has "national" law for this purpose and is said/believed to adhere (or at least to maintain a comprehensive and aligned list) to the WA and other multilateral controls willingly. It is important to consider this status - not only based on law, but more importantly regarding human nature and incentives. Cheers.