Taiwan prosecutors filed additional indictments on January 5 2026 against the Taiwan unit of Tokyo Electron and three other defendants, expanding a case that began with a former TSMC employee’s indictment in August 2025. The new filings target the company’s 2‑nanometer process technology, the most advanced node in TSMC’s portfolio and a key driver of its AI‑chip business.
The indictment names two former TSMC employees, both surnamed Chen, and a former Tokyo Electron Taiwan employee, Lu. Prosecutors allege that the defendants transferred proprietary information about the 2‑nm process to an unnamed competitor without authorization, using employee accounts and internal networks to access confidential data. The charges also accuse the defendants of violating Taiwan’s National Security Act and the Trade Secrets Act, marking the first corporate indictment under the National Security Act in a technology case.
If convicted, the Tokyo Electron Taiwan unit faces fines of up to T$120 million (about US$3.8 million) and an additional T$25 million fine, while the individuals could receive prison terms ranging from one year to eight years and eight months. The case underscores Taiwan’s willingness to use national‑security law to protect critical semiconductor technology and signals a tougher regulatory environment for suppliers in the supply chain.
TSMC has denied any wrongdoing and said it is cooperating fully with the authorities. Tokyo Electron’s parent company has stated that it was not indicted and that the charges do not affect its financial results. The company emphasized that the Taiwan subsidiary was charged over supervisory obligations related to a former employee and that neither TEL nor its Taiwan arm directed or engaged in technology theft.
The indictment has several strategic implications. It highlights the importance of intellectual‑property protection in the highly competitive semiconductor industry, where advanced nodes like the 2‑nm process are national‑security assets. The case could strain the relationship between TSMC and its key equipment supplier, Tokyo Electron, and may prompt other suppliers to tighten internal controls. It also sets a legal precedent that could influence how trade‑secret theft is prosecuted in the region, potentially reshaping compliance practices across the industry.
While the legal action is significant, TSMC’s shares reached a record high on the same day, driven by strong demand for AI chips rather than the indictment. The market reaction to the legal filings was muted, indicating that investors view the case as a regulatory risk rather than an immediate financial threat to the company’s earnings or cash flow.
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