Potential Risks Posed by Technology-Related Data Breaches to National Security

TSMC Faces Alleged Theft of Trade Secrets as Competition in Semiconductor Industry Intensifies

The semiconductor industry is in the midst of a significant shakeup, with Taiwan Semiconductor Manufacturing Company (TSMC) at the centre of a high-profile criminal case involving the alleged theft of trade secrets.

TSMC, a global leader in semiconductor manufacturing, is preparing to start volume production of 2-nanometer chips in the second half of 2021, well ahead of its major rivals. However, the company's progress has been disrupted by an alleged incident involving a former TSMC employee, surnamed Chen.

According to reports, Chen is the main suspect in the case, and he allegedly sought aid from former colleagues for information on TSMC technology. Tokyo Electron, a Japanese chip manufacturing tool supplier, has confirmed that one of its employees, presumably Chen, was involved in the incident. The employee has since been fired.

The theft of TSMC's advanced chip manufacturing technology has triggered national alarm and could undermine the company's competitiveness in the sector. Prosecutors invoked the National Security Act and the Trade Secrets Act in charging the suspects, who are accused of conspiring to use the information to help Tokyo Electron vie for more TSMC contracts.

The complexity of semiconductor technology makes it difficult for TSMC's rivals to rapidly advance their manufacturing capabilities to 2-nanometer, but information from TSMC could help them accelerate the development process. The case highlights the intense competition in the semiconductor industry, with chips elevated to strategic resources amid growing geopolitical tension.

Meanwhile, TSMC's smartphone customers, including Apple Inc and MediaTek Inc, are preparing for 2-nanometer chip production. Samsung Electronics Co is reportedly planning to start volume production of its first 2-nanometer chips in Texas next year.

The behaviour of the suspects in the Tokyo Electron case underscores the importance of enhancing employee education on corporate secrets and national security. Japanese state-backed chipmaker Rapidus Corp is moving into pilot production of 2-nanometer chips, with mass production slated for 2027.

In a related development, Intel Corp is reportedly considering abandoning external sales of 18A technology to focus on its 14A technology due to unsatisfactory yield rate and heavy financial burdens. The National Science and Technology Council in 2023 listed 22 "critical national security technologies," including chip manufacturing technologies at the 14-nanometer and more advanced levels, to safeguard Taiwan's security and industrial competitiveness.

TSMC's annual capital expenditure is expected to be approximately 5% of GDP this year, up from 4% in 2023. The company's continued investment in research and development is a testament to its commitment to staying at the forefront of the semiconductor industry.

As the industry continues to evolve, it is clear that the protection of trade secrets will remain a critical issue. The Tokyo Electron case serves as a reminder of the importance of safeguarding intellectual property and maintaining the integrity of the industry.