Taiwan Court Hands Down Prison Sentences Over Leaks of TSMC Trade Secrets -- 2nd Update

By Yang Jie and Sherry Qin

A Taiwanese court on Monday sentenced a former employee of Taiwan Semiconductor Manufacturing Co. to 10 years in prison for stealing trade secrets.

The case marks the first time Taiwan has used security legislation to prosecute the theft of intellectual property involving critical chip technology.

It has been closely watched as a bellwether for how Taiwan manages the security of its semiconductor sector, which is increasingly viewed through the lens of geopolitics. Taiwanese officials have said that corporate theft of sensitive information has surged over the past decade.

Monday's ruling involved multiple defendants indicted for allegedly orchestrating leaks of TSMC's proprietary technology to Japanese equipment maker Tokyo Electron, in violation of Taiwan's security and trade-secret laws.

Chen Li-ming, an ex-TSMC engineer who joined Tokyo Electron and was subsequently dismissed by the Japanese company following his indictment, received a 10-year sentence from Taiwan's Intellectual Property and Commercial Court. Three other engineers received sentences ranging from two to six years.

Separately, a Tokyo Electron manager was convicted of ordering the deletion of confidential TSMC files and received a 10-month sentence suspended for three years.

Tokyo Electron's Taiwan branch was fined 150 million New Taiwan dollars, equivalent to about US$4.8 million, with the court ordering the company to pay NT$100 million to TSMC and the remaining NT$50 million to the state treasury after the firm itself was indicted as a corporate entity.

A court official said all the defendants, including Tokyo Electron's Taiwan branch, have the right to appeal.

Tokyo Electron said it takes the ruling seriously and will continue strengthening information management across the group. The company noted that neither the investigators nor the court found any organizational wrongdoing or leakage of confidential data on its part, and therefore, it doesn't expect the outcome to have any financial impact on its business.

TSMC said it maintains "a zero-tolerance policy toward any actions that compromise the protection of trade secrets or harm the company's interests." The chip maker will strengthen its internal management and monitoring systems and work closely with regulatory authorities to protect its competitive advantage and operational stability, it said.

The court said Chen solicited confidential files from three other engineers, who were employed at TSMC at the time, to improve Tokyo Electron's machinery.

A court official said that, based on information provided by TSMC, Tokyo Electron--a supplier rather than a competitor of the Taiwanese company--didn't leak any of the materials.

The specific terms of the settlement between the two companies remain confidential and haven't been disclosed, he added.

The court said Tokyo Electron failed to supervise Chen properly, noting that internal performance evaluations noted his ability to "leverage existing client resources" and obtain customer and competitor information.

The investigation was triggered last July after TSMC's internal security systems detected irregular access to confidential data.

TSMC, which manufactures chips for industry giants including Apple and Nvidia, has maintained that it will take action against trade-secret theft to defend its competitive advantage.

Tokyo Electron has previously said that it cooperated with local authorities throughout the investigation.

Shares of both companies moved little after the ruling.

Write to Yang Jie at [e-mail] and Sherry Qin at [e-mail]

(END) Dow Jones Newswires

04-27-26 0710ET