TSMC Trade Secrets: Ex-Employees Get 10-Year Sentences

A Taiwanese court has sentenced a former employee of Taiwan Semiconductor Manufacturing Company (TSMC) to 10 years in prison for stealing trade secrets and passing them to Japanese rival Tokyo Electron. The landmark case, decided on April 27, 2026, by the Intellectual Property and Commercial Court in Taiwan, highlights the growing threat of industrial espionage in the global semiconductor industry.

What Happened in the TSMC Trade Secrets Case?

The convicted former employee, Chen Li-ming, worked at TSMC before moving to Tokyo Electron's Taiwan subsidiary. From mid-2023, Chen used his relationships with former colleagues to illegally access, photograph, and copy confidential TSMC trade secrets. The stolen information included sensitive data about TSMC's next-generation chip production technologies, including 2-nanometer and A14 process nodes. The goal was to help Tokyo Electron win more equipment supply contracts from TSMC.

Three other former TSMC employees received sentences of six, three, and two years respectively for their roles in the scheme. A Tokyo Electron-affiliated individual was sentenced to 10 months. Tokyo Electron itself was fined 150 million Taiwanese dollars (approximately $4.8 million or €4 million), of which 100 million may be paid to TSMC as compensation.

The court noted that the sentences were lower than the 14 years prosecutors had sought, citing Chen's full confession and cooperation in identifying co-conspirators. Critically, the court found that no trade secrets were leaked to external third parties. However, the judge ruled that Tokyo Electron should have exercised stricter oversight over its employees.

Why Is This Case Significant for the Chip Industry?

The TSMC trade secrets case underscores the escalating concerns over industrial espionage in the semiconductor sector. TSMC is the world's largest dedicated contract chipmaker, supplying critical components to Nvidia, Apple, AMD, Broadcom, and Qualcomm. It holds approximately 70% of the global semiconductor foundry market share and is a linchpin of the global technology supply chain.

Policymakers worldwide increasingly view semiconductors as matters of national security. Advanced chips are essential for artificial intelligence, supercomputers, defense systems, and 5G infrastructure. Taiwan, which produces over 60% of the world's semiconductors, has been aggressively prosecuting trade secret theft to protect its technological edge. The case was prosecuted under Taiwan's National Security Act, reflecting the high stakes involved. Similar to the 2025 chip export controls imposed by major economies, this verdict signals a hardening stance on protecting semiconductor intellectual property.

Rising Industrial Espionage in Semiconductors

Cyberattacks and insider threats targeting semiconductor firms have surged dramatically. According to CloudSEK research, semiconductor-related cyber incidents have increased over 600% since 2022, with ransomware losses exceeding $1.05 billion since 2018. A single attack on TSMC in 2023 resulted in an estimated $256 million loss. The convergence of geopolitical tensions — particularly the US-China chip conflict — and the immense value of chip designs has made semiconductor IP a prime target for both nation-state actors and corporate espionage.

The global semiconductor supply chain security has become a top priority for governments. The United States, European Union, Japan, and South Korea have all introduced legislation to boost domestic chip production and protect intellectual property. The CHIPS Act in the US and similar initiatives in Europe aim to reduce dependence on a single geographic hub for advanced manufacturing.

What Does the Verdict Mean for Tokyo Electron and TSMC?

Tokyo Electron, a Japanese semiconductor equipment manufacturer and one of the world's largest, stated it takes the ruling seriously but emphasized that no organizational involvement by the company was found. The court acknowledged that Tokyo Electron had reached a settlement with TSMC. However, the fine and the court's criticism of its oversight practices could damage the company's reputation and lead to stricter compliance measures.

TSMC, for its part, reaffirmed a zero-tolerance policy on trade secret violations. The company has invested heavily in security measures, including employee training, access controls, and digital monitoring, to prevent future leaks. The impact of TSMC's technology leadership on global AI and computing markets means any compromise of its IP could have far-reaching consequences.

All defendants have the right to appeal the verdict, meaning the legal saga may continue. Legal experts suggest that the case could set a precedent for how Taiwanese courts handle similar trade secret disputes in the future, potentially leading to even harsher penalties for industrial espionage.

Frequently Asked Questions

What trade secrets were stolen from TSMC?

The stolen information included confidential data about TSMC's next-generation chip production technologies, specifically related to 2-nanometer and A14 process nodes used for advanced semiconductor manufacturing.

How long were the sentences in the TSMC espionage case?

The ringleader received 10 years in prison. Three other former TSMC employees received sentences of six, three, and two years. A Tokyo Electron affiliate received 10 months, and Tokyo Electron was fined 150 million Taiwanese dollars ($4.8 million).

Why is semiconductor trade secret theft considered a national security issue?

Semiconductors are critical for artificial intelligence, defense systems, supercomputers, and 5G technology. Losing proprietary chip manufacturing technology can undermine a country's economic competitiveness and military capabilities, making such theft a matter of national security.

Could Tokyo Electron face further consequences?

While the court found no organizational involvement by Tokyo Electron, the company was fined and criticized for inadequate employee oversight. Additional civil lawsuits or regulatory actions could follow, and the verdict may affect business relationships with TSMC and other chipmakers.

What measures can semiconductor companies take to prevent espionage?

Companies can implement strict access controls, conduct regular employee training on IP protection, use digital watermarking and monitoring tools, enforce non-disclosure agreements, and conduct thorough background checks. International cooperation and information sharing between governments also play a key role.

Sources

US News: Taiwan court sentences ex-Tokyo Electron staff to 10 years

Al Jazeera: Taiwan court hands down jail terms in TSMC trade secrets case

Taipei Times: Former TSMC engineer handed 10 years for leaking trade secrets