Prosecutors in Taiwan on Monday indicted a former deputy manager at TSMC for allegedly attempting to leak core technology to China. The Taiwan High Prosecutors Office’s Intellectual said that the former employee, whose surname is Chen (陳), has been charged under the National Security Act and the Trade Secrets Act and that the government will pursue a seven-year prison sentence.
The case marks the first time that Taiwan has used the National Security Act to prosecute corporate espionage in the country’s crucial semiconductor industry. It comes as Beijing pursues an aggressive industrial policy aimed at closing the gap with the United States in the chip manufacturing processes undergirding the global AI race.
The proposed sentence for Chen is significantly more severe than the punishments given to semiconductor workers previously convicted of spying for China, when cases were handled under the more lenient Trade Secrets Act.
Taiwan’s 2022 decision to bring semiconductor leaks under the purview of national security law reflected the growing belief that espionage could be used to slowly erode the dominance of Taiwan’s semiconductor industry, and with it the country’s geopolitical leverage. At the time, the Taiwanese government characterized the new penalties as a tool to protect its chip industry against “the Chinese Communist Party’s illegal activities of talent-poaching and secret-stealing.”
But the initial uses of the penalties, which began last year, targeted former TSMC employees for leaking corporate secrets to countries traditionally friendly with Taiwan, like Japan and the United States. Only with the indictment of Chen has the original national security-based legal vision become a reality.
According to prosecutors, Chen conspired with a Hong Kong resident, surnamed Ding (丁), between May 2023 and February 2024 to establish China Semiconductor Materials Analysis Co. (CSMAC), in mainland China. Chen allegedly worked to poach Taiwanese talent to work for CSMAC. He later returned to Taiwan to copy a trove of sensitive documents, which prosecutors said he intended to share with investors in China.
TSMC alerted the authorities after noticing irregularities in Chen’s use of the company’s internal storage system. The company retrieved the documents from Chen before he could share them with his associates in China.
“TSMC is a leading global semiconductor manufacturer,” the prosecutors’ office said. “Its technological advantages not only drive the domestic economy and people’s livelihoods but also serve as an indicator of the overall competitiveness of Taiwan’s semiconductor industry in a challenging international environment.”
The recommended seven-year sentence is slightly more lenient than the 10 years to which Taiwan recently sentenced Chen Li-ming (陳力銘) (no relation), another former TSMC employee who was convicted for leaking secrets to Japanese firm Tokyo Electron earlier this year. If that case is any indication, Chen’s willingness to express contrition and cooperate with authorities may impact the length of his sentence.
The prosecutors’ office, for their part, struck a grave tone in its description of Chen’s alleged crimes, which it said posed a threat to what Taiwanese authorities sometimes refer to as the “sacred mountain range” (神山群) of local technology champions.
“We will show no leniency in order to ensure the global technology leadership of our nation’s sacred mountain range,” the office said.
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