Taiwan Charges Tokyo Electron in TSMC Trade Secrets Case

Taiwanese prosecutors have charged Tokyo Electron Ltd.'s Taiwan unit with violations of the National Security Act and the Trade Secrets Act. This indictment follows the earlier indictment of a former employee, identified only by the surname Chen, who allegedly stole trade secrets from Taiwan Semiconductor Manufacturing Company (TSMC). Prosecutors have described this case as the first corporate indictment under Taiwan's National Security Act related to the theft of critical national technology trade secrets.

ReutersCityLabBarron's

The prosecutors assert that Tokyo Electron's Taiwan unit failed to adequately supervise Chen, who solicited confidential information from former TSMC colleagues after joining the company. The prosecutors concluded that the company had a legal obligation to oversee Chen's activities but lacked sufficient preventive measures or managerial oversight. Consequently, they are seeking a fine of NT$120 million (approximately $4 million) against Tokyo Electron for its failure to prevent the alleged theft.

CityLab

In response to the indictment, Tokyo Electron stated that neither it nor its Taiwan subsidiary had been accused of organizational involvement in the theft. The company emphasized that its internal investigation found no evidence of its direction or encouragement of the former employee's actions. Tokyo Electron has expressed regret over the situation and has committed to enhancing its information security framework, including implementing a 24/7 monitoring system to prevent future incidents. The company also plans to strengthen compliance and audit systems across its operations.

Reuters

The case is significant as it highlights the increasing scrutiny of corporate practices in Taiwan, particularly in industries crucial to national security. The semiconductor sector, where TSMC is a leading player, is vital for Taiwan's economy and technological advancement. The allegations against Tokyo Electron underscore the potential risks associated with partnerships in this sensitive industry.

CityLab

While the prosecutors have laid out their case against Tokyo Electron, the company has maintained that it acted responsibly and that the indictment does not reflect any systemic issues within its operations. Critics may argue that the case raises questions about the adequacy of corporate governance in protecting sensitive information and the responsibilities of companies in safeguarding trade secrets.

Reuters

• “We deeply regret this matter, take it with the utmost seriousness and sincerely apologise for the considerable concern this has caused our stakeholders,” — Tokyo Electron

Reuters

• “The indictment does not allege any organizational involvement by Tokyo Electron Limited or Tokyo Electron Taiwan Ltd. in directing or encouraging the former employee to improperly obtain information, nor does it identify any external leakage of the relevant confidential information,” — Tokyo Electron

Reuters

The indictment of Tokyo Electron's Taiwan unit marks a pivotal moment in Taiwan's enforcement of national security laws related to trade secrets. As the case unfolds, it may set a precedent for how similar cases are handled in the future, particularly in the sensitive semiconductor industry.

Reuters