Semiconductor Giant TSMC Reveals Trade Leaks Involving Employees

Entities from China have previously been linked to such violations at TSMC.

The Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) logo at its headquarters in Hsinchu, Taiwan. Chiang Ying-ying/AP Photo

Taiwan Semiconductor Manufacturing Co. (TSMC) has stated that it has discovered unauthorized activities by personnel leading to information leaks in the company, according to a recent disclosure.

“TSMC recently detected unauthorized activities during routine monitoring, leading to the discovery of potential trade secret leaks,” the company said in an Aug. 5 statement emailed to The Epoch Times. “Following an internal investigation, thanks to our comprehensive and robust monitoring mechanisms, we were able to identify the issue early. TSMC has taken strict disciplinary actions against the personnel involved and has initiated legal proceedings.”

Further details were not available as the case is under judicial review.

TSMC, based in Hsinchu, Taiwan, is the world’s largest semiconductor manufacturer. It has operations worldwide, with U.S. branches located in California, Washington, and Arizona.

In March, TSMC CEO C.C. Wei joined President Donald Trump at the White House to announce a $100 billion investment in its Arizona-based semiconductor chip manufacturing operation. Since then, the company has raised the amount to more than $165 billion.

Chinese actors have previously been linked to multiple incidents of trade leak instigations involving TSMC employees.

Regarding the latest incident, the Taiwan High Prosecutors Office said in a statement that three individuals were detained late last month after TSMC reported the findings of an internal investigation.

The individuals, two current staff and a former employee, are suspected of violating Taiwan’s national security law, it added.

The prosecutors office said two other individuals had been released on bail, with another getting released.

TSMC is currently developing its two-nanometer (N2) chips, which, when completed, would be the “most advanced technology in the semiconductor industry in terms of both density and energy efficiency,” the manufacturer said on its website.

In April 2018, a former TSMC employee was arrested by authorities for planning to steal documents related to the company’s 28-nanometer (nm) chip technology.

The employee aimed to take these documents to his new job at CSMC Technologies, a Chinese chipmaker, and reproduce the technology. He was sentenced to a prison term of about 18 months.

Later that year, another former TSMC employee was charged with theft of trade secrets and breach of trust. The individual oversaw three different chip technologies at TSMC: 20 nm, 10 nm, and 5 nm. The employee allegedly aimed to hand over the secrets to a Chinese company, Shanghai Huali Microelectronics.

There has also been a significant uptick in the number of Chinese Communist Party (CCP) spies operating in Taiwan.

China’s Semiconductor Weakness

China’s focus on stealing chip technologies is driven by the fact that the country has lagged behind in this sector.

Back in 2014, China announced a $19.3 billion fund to support domestic semiconductor companies. In 2019, another $28.14 billion was injected. In May 2024, the third phase of this funding initiative was announced, with Beijing declaring it would set aside around $47.45 billion for the industry.

However, things have not gone well for the regime. In an interview with The Epoch Times, Lai Jung-wei, executive director of the Taiwan Inspiration Association, said he believes the first two funding phases ended up as failures, leading to the third funding, the outlook of which also remains bleak.

Chip manufacturing has a high threshold because it requires 600–700 processes and a “dust-free, moisture-resistant environment—standards that Chinese plants lack, according to a Taiwan-based sociologist who visited China’s semiconductor wafer fabrication plants,” he said.

“The CCP cannot overtake others in a short period of time to establish a complete and self-reliant supply chain, from upstream to downstream; it is impossible, it cannot happen,” Lai said.

In a big blow to China’s chip ambitions, Taiwan’s International Trade Administration said on June 15 that it was adding Chinese telecom giant Huawei and Semiconductor Manufacturing International to its Strategic High-Tech Commodities Entity List.

The two companies are leading Beijing’s efforts to develop high-tech chips needed for artificial intelligence technologies. By adding them to the blacklist, Taiwan imposed new export restrictions on the firms, aligning with Washington’s objectives to block the regime from accessing advanced semiconductor technology.

Mary Hong and Reuters contributed to this report.