TSMC: Another Former Executive Arrested for Allegedly Stealing Industrial Secrets

The Taiwan prosecutor's office has indicted a former manager of TSMC on charges of copying 21 confidential documents from the company, some of which pertain to semiconductor technologies considered "critical national technologies" by the Taiwanese government. According to reports from Nikkei Asia, the material was intended to be used in China, although the transfer never actually took place.

The man, identified by the surname Chen, has been in custody since the end of May. Prosecutors are seeking a sentence of up to seven years in prison, marking this as the first case initiated under Taiwan's National Security Act related to an alleged attempt to disclose the island's most sensitive chip technologies.

According to prosecutor reports, TSMC discovered irregularities through its internal monitoring systems. The company launched an internal investigation and managed to recover all improperly copied documents, thus preventing them from being transferred abroad.

A spokesperson for the Taiwanese High Prosecutor's Office described the case as "highly significant," despite the attempted transfer failing, because it represents the first legal proceeding of this kind related to the protection of strategic semiconductor technologies.

The investigation into Chen emerged during another espionage inquiry involving a citizen of Hong Kong, Ding Xiaohu. According to Taiwan's central news agency, Ding acted on instructions from the Central Military Commission of the Chinese Communist Party, entering Taiwan multiple times to recruit agents and gather information on the island's critical technologies.

Investigators claim that Ding recruited Chen through a middleman with the surname Huang. Ding died earlier this year and was never formally charged.

Between May 2023 and February 2024, Chen and Ding allegedly collaborated to establish CSMAC, a Chinese company specializing in semiconductor material analysis. Chen prepared several proposals for the company, including a plan called the 'Blue Ocean Plan,' which involved recruiting workers from Taiwan's chip industry to join CSMAC. According to prosecutors, the former manager took home documents copied from TSMC to study them and utilize them in developing business in China.

The National Security Act, in force in Taiwan since 2022, makes it a crime to copy, use, or disclose trade secrets connected to technologies classified as essential for national security. The list includes production processes for the most advanced 14 nm semiconductors.

This is not the first case involving TSMC. Last August, three employees and former employees of the company were arrested for an alleged attempt to disclose data related to the 2 nm production process. The investigation also involved the Taiwanese branch of Tokyo Electron, accused of failing to prevent the theft of information.

TSMC is also engaged in a civil lawsuit against Wei-Jen Lo, a former R&D executive who moved to Intel last year, while Taiwanese authorities conduct a parallel national security investigation related to his departure from the company.