Taiwan’s TSMC fires engineers over suspected theft of semiconductor secrets

Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest and most advanced chipmaker, announced on Tuesday it had fired two employees whom it suspected of stealing and attempting to share cutting-edge trade secrets.

The two engineers, alongside a third suspect, have since been arrested in what is the first trade secrets case brought under Taiwan’s National Security Act, a law that intends to protect the country’s advantage in producing pioneering semiconductors, Nikkei reported.

TSMC said it discovered the unauthorized access — which related to its 2-nanometer chip technology — through internal monitoring systems. The company said it rapidly fired the employees in-line with its “zero-tolerance policy” for such issues before reporting the case to the Taiwan High Prosecutors Office.

Prosecutors said Tuesday they questioned several suspects last week and searched home and employment addresses before making the arrests. While the crime is considered a national security offense, prosecutors did not state whether they considered a foreign state to be involved.

The alleged theft highlights the strategic importance of TSMC and the significant value of its intellectual property, with the company producing more than 90% of the world’s most advanced semiconductors; including almost all chips below 5nm.

The company has been described as a “cornerstone” of the Taiwanese economy and is considered a key part of the island’s geopolitical defence against military invasion by Beijing, a potential flash-point that is suspected to be driving many Chinese compromises of United States critical infrastructure.

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Chinese state-sponsored hackers have been attempting to steal Taiwanese intellectual property relating to semiconductor production for years in a bid to reduce China’s own dependence on exports from what it perceives to be a renegade province.

Research from cybersecurity company Proofpoint published last month identified three separate Chinese state-sponsored hacking groups targeting the Taiwanese semiconductor industry within just the last few months.

“Targets of these campaigns ranged from organizations involved in the manufacturing, design, and testing of semiconductors and integrated circuits, wider equipment and services supply chain entities within this sector, as well as financial investment analysts specializing in the Taiwanese semiconductor market,” Proofpoint stated.

TSMC compartmentalizes the trade secrets involved in producing its most advanced chips. The knowledge involved is spread across thousands of engineers and the production itself requires a range of proprietary equipment that cannot be replicated if an attacker was able to access a single set of blueprints.

The threat of commercial espionage was addressed by the company’s chief executive, C.C. Wei, in a shareholder meeting this June when he said the complexity of manufacturing 2nm semiconductors meant the technology was “beyond the capacity of an individual, 10 people, or even a hundred, to steal.”