Tokyo Electron Taiwan Charged Over Alleged Theft of TSMC Trade Secrets, Prosecutors Seek $3.8 Million Fine

Tokyo Electron Faces Criminal Charges In Taiwan Over Alleged TSMC Secrets Theft

Taiwan’s most sensitive chip technologies are again at the centre of a criminal battle, this time pulling one of Japan’s biggest equipment suppliers into the spotlight.

Prosecutors have charged Tokyo Electron’s Taiwan subsidiary with corporate criminal liability, accusing it of failing to prevent the alleged theft of TSMC’s 2-nanometre process secrets — a technology Taiwan classifies as national core critical to its security and economic strength.

Why Taiwan Says Tokyo Electron Must Answer For A Security Breach

Taiwanese prosecutors announced on 2 December 2025 that Tokyo Electron Taiwan Ltd. will stand trial under both the National Security Act and the Trade Secrets Act.

They argue that the company had a legal responsibility to stop the wrongdoing but failed to put in place concrete preventive or managerial measures despite having internal rules.

Prosecutors are seeking a fine of up to NT$120 million (around US$3.8 million).

In their statement, they said Tokyo Electron has not done its best to carry out preventive measures, while specifying that they were not accusing the Japanese firm of exploiting the stolen data.

According to officials, this marks the first time a corporation in Taiwan has been indicted under the National Security Act over the alleged theft of technology deemed vital to national security.

How The Alleged Theft Happened

The case stems from the August arrest and indictment of three individuals — including a former TSMC engineer surnamed Chen who later joined Tokyo Electron Taiwan, and two current TSMC engineers.

Prosecutors allege Chen convinced his former colleagues to hand over confidential material related to TSMC’s 2nm process, one of the most advanced semiconductor manufacturing technologies globally.

Authorities say the confidential information was intended to help improve Tokyo Electron’s etching equipment and strengthen its chances of securing contracts for TSMC’s next-generation production lines.

Prosecutors have sought jail terms of 14 years for Chen, nine years for engineer Wu, and seven years for engineer Ko, all of whom were detained on 1 September and barred from contacting the outside world.

Tokyo Electron later confirmed that a former employee of its Taiwanese unit was involved in the case.

The company said it had dismissed the individuals linked to the allegations and reiterated that it had found no evidence that confidential TSMC 2nm information had been leaked to a third party.

It added that it is cooperating fully with investigators.

TSMC’s Wider IP Protection Battle

The incident lands during an intense year for TSMC’s intellectual property protection efforts.

The chip giant, supplier to Apple and Nvidia, has faced a string of suspected breaches.

In November, it filed a lawsuit against its former senior vice president, Wei-Jen Lo, accusing him of posing a high probability risk of leaking confidential information after joining Intel as an executive vice president.

Prosecutors seized computers and other digital evidence from his homes and are reviewing potential violations of the National Security Act.

Intel’s CEO Lip-Bu Tan dismissed the accusation as speculation, insisting the company respects intellectual property rights.

TSMC also reported the Tokyo Electron-linked theft earlier this year, triggering the criminal investigation now under way.

Why Taiwan Is Tightening Its Grip On Chip Secrets

Taiwan produces most of the world’s advanced semiconductors, making its technology an attractive target for foreign actors, including entities linked to Beijing, according to Taiwanese officials.

The island has taken a more aggressive stance in 2025, including threatening to halt some chip component exports to South Africa in September.

Analysts say the Tokyo Electron case shows Taiwan’s determination to enforce national security rules even against major foreign partners.

Citi Research’s Masahiro Shibano told investors that any impact on Tokyo Electron’s earnings outlook will be limited, suggesting the case may be heading toward resolution.

However, scrutiny on the Japanese company — typically seen as a behind-the-scenes supplier to TSMC, Samsung and Intel — has increased sharply.

Its shares rose 4.5 percent on the day of the announcement, while TSMC’s gained 1 percent.

What Happens Next For Tokyo Electron And TSMC

Tokyo Electron says it is still verifying the details released by authorities but stressed it has strict internal policies and does not tolerate misconduct.

TSMC declined to comment.

Prosecutors say the individuals involved intended to use TSMC’s proprietary information overseas, which elevates the charges to a matter of national security.

Taiwan is now asking the court to impose a single enforceable fine of NT$120 million on Tokyo Electron Taiwan after tallying multiple offences under both security and trade secret laws.

TSMC has stated it will continue strengthening its monitoring systems and work closely with authorities to protect its competitiveness — aiming to prevent further breaches involving its most advanced manufacturing secrets.