Former TSMC Manager Becomes First Person Charged Under Taiwan's National Security Act Over Alleged Chip Secrets Leak to China

Taiwanese prosecutors have filed charges against a former TSMC deputy manager, identified only as Chen, marking the first indictment under the country's National Security Act for an alleged attempt to hand over Taiwan's protected chipmaking technology to China. A spokesperson for Taiwan's High Prosecutors Office told Nikkei Asia that the case is legally significant even though the transfer never actually happened, calling it notable specifically as "the first prosecution under the National Security Act involving an alleged attempt to leak Taiwan's national core technologies to China."

According to the reporting, Chen allegedly worked with a man from Hong Kong to build the groundwork for a semiconductor materials analysis company in China called CSMAC. As part of that plan, prosecutors say Chen copied 21 confidential TSMC documents, brought them home to study, and intended to use them to get the China-based venture off the ground. Investigators also allege Chen was looking to recruit additional talent out of Taiwan to staff the new company.

Chen has already spent the past couple of months in detention and now faces a possible sentence of up to seven years in prison. TSMC, for its part, says it has recovered every one of the documents that were taken, limiting the practical damage even as the legal case moves forward.

A pattern, not an isolated incident

This isn't the first time TSMC has had to deal with employees allegedly walking off with sensitive information. The company has fired staff over trade secret concerns before, and Taiwanese prosecutors have gotten involved in previous cases as well. Around a year ago, reporting flagged that Taiwan's broader chip industry had become an increasingly attractive target for Chinese state-sponsored hacking groups looking to extract manufacturing know-how. This latest indictment fits that same pattern, but with a legal twist: it's the first time a case like this has actually triggered a National Security Act prosecution, rather than a more conventional trade secrets or corporate espionage charge.

That distinction matters. Taiwan treats its chip industry as a matter of national security as much as economic policy, given that TSMC's manufacturing lead is one of the island's most significant strategic assets, both economically and geopolitically. Prosecuting an alleged leak attempt under that specific law signals how seriously authorities are treating even unsuccessful efforts to move core technology overseas.

Why China wants what TSMC has

China remains the most obvious and persistent threat to Taiwan's dominance in chipmaking. On the memory side, Chinese manufacturer CXMT has been making real progress in DRAM production, closing the gap in a segment where China has historically lagged. But TSMC's business is built on high-performance logic chips, the kind that power everything from smartphones to AI accelerators, and China hasn't yet produced anything on that front capable of seriously challenging TSMC's position.

That gap is precisely why cases like Chen's draw attention. TSMC is the world's largest and most technologically advanced chipmaker, and the intellectual property locked inside its manufacturing processes represents years, sometimes decades, of accumulated engineering work that competitors can't simply replicate from scratch. A successful leak of trade secrets wouldn't hand China a finished competitor overnight, but it could meaningfully shorten the runway needed to catch up in logic chip manufacturing, an area where the country currently has no real answer to TSMC's lead.

What happens next

Chen's case will now proceed through Taiwan's court system, with prosecutors seeking a sentence of up to seven years. TSMC has said the recovered documents mean the immediate business risk is contained, but the indictment itself is likely to keep drawing scrutiny to how the company screens and monitors employees with access to its most sensitive manufacturing data. Given the pattern of firings, investigations, and now a first-of-its-kind prosecution, it's a safe bet this won't be the last case of its kind to surface out of Taiwan's chip sector.