TSMC, Samsung, and SK Shaken by Technology Leakage Risks as a ‘Fracture of Trust’ Spreads from China to Japan and the United States

Japanese firms implicated in TSMC technology leakage, sending shockwaves through Taiwanese society
Retired executive’s move to Intel expands investigation to U.S. companies
Repeated technology leakage cases at Samsung and SK heighten semiconductor security risks

As global competition in the semiconductor industry intensifies, Taiwan has been rocked by revelations that cutting-edge process technologies from TSMC, the world’s leading foundry, were leaked to a long-standing Japanese semiconductor equipment partner. The investigation has since widened to include Intel, following the job transfer of a former TSMC executive, fueling assessments that perceived technology threats—once concentrated on China—are now extending to allied nations. South Korea is facing similar challenges, with a series of core technology leakage cases underscoring that security and trust have emerged as systemic challenges across the advanced semiconductor industry.

Taiwanese Prosecutors Indict Tokyo Electron Taiwan for National Security Law Violations

On the 5th, Taiwan’s High Prosecutors Office announced that it had additionally indicted the Taiwanese subsidiary of Tokyo Electron (TEL) on charges of violating the National Security Act in connection with the leakage of TSMC’s advanced technologies. Prosecutors concluded that TEL bore responsibility for inadequate oversight in a case involving the unauthorized transfer of TSMC’s 2-nanometer process technology uncovered last year, and have requested that the court impose a corporate fine of approximately $3.8 million. This marks the first instance since the May 2022 amendment of the National Security Act in which a corporation has been charged with the extraterritorial use of trade secrets deemed “national core technologies” in the semiconductor sector.

In August last year, Taiwanese prosecutors detained and indicted former TSMC engineer Chen Li-ming on charges of leaking 2-nanometer process technology to TEL. According to investigators, Chen worked for eight years in TSMC’s yield improvement division before transferring to TEL’s marketing department in 2022. Beginning the following year, he allegedly contacted two current TSMC engineers with whom he had personal ties and siphoned off key mass-production test parameters for etching equipment—central to the 2-nanometer process. From August 2023 to May 2024, the group reportedly accessed confidential documents via work-from-home laptops, photographed them with mobile phones, and transmitted the data in a sustained effort to leak proprietary technologies.

Particularly controversial was the discovery that Chen prepared work logs for internal TEL reporting based on some of the misappropriated materials. This has raised suspicions of direct or indirect corporate involvement, with Taiwanese prosecutors believing TEL sought to leverage the leaked technologies to enhance the performance of its semiconductor equipment. TEL responded by stating that an internal investigation found no evidence that the technologies in question were actually used in its products or services.

TSMC Adjusts Pace of Japanese Investment Amid Technology Leakage Fallout

The case sent shockwaves through Taiwanese society, as it involved a Japanese semiconductor equipment firm rather than a Chinese entity. Traditionally, incidents of advanced semiconductor technology leakage have prompted immediate suspicion toward companies linked to the Chinese Communist Party. The involvement of a Japanese firm—an ally across diplomatic, security, and economic domains—has fundamentally unsettled prevailing assumptions. The impact is magnified by TEL’s role as a core supplier of etching and deposition equipment and a key pillar of TSMC’s supply chain built over decades of close cooperation.

Coinciding with the incident, signs of strain have begun to emerge in the previously close semiconductor partnership between Taiwan and Japan. In October 2021, TSMC announced plans to build its first Kumamoto plant in line with Japan’s aggressive subsidy strategy. Construction began in April 2022, and the plant commenced operations in February 2024 after just 28 months, with plans for a second facility unveiled around the same time. However, during its second-quarter earnings call following the leakage revelations, TSMC refrained from providing a concrete production timeline for the Kumamoto second plant. Market observers now speculate that, amid massive ongoing investments in the United States, TSMC may recalibrate the pace of its Japanese expansion.

Taiwan’s growing distrust of allies is not confined to Japan. In November last year, prosecutors conducted searches at two residences of Luo Wei-lun, former TSMC senior vice president who joined Intel after leaving the company, and froze his assets. Authorities are investigating whether Luo provided national core technologies to Intel. Taiwanese media outlets such as TechNews and Commercial Times reacted strongly, describing the move of a “75-year-old veteran” into a rival firm just three months after retirement as a clear betrayal and an attempted technology transfer. Intel has maintained that the hiring was lawful, but the discovery of large volumes of advanced technical materials among seized items has intensified allegations of National Security Act violations.

CXMT Secures Technology by Recruiting Core Talent from Samsung and SK

The damage caused by advanced semiconductor technology leakage is not limited to Taiwan. Samsung Electronics and SK hynix have endured prolonged difficulties stemming from repeated incidents involving core technology theft. Last month, South Korean prosecutors indicted ten former Samsung employees for violations of the Industrial Technology Protection Act after they defected to Chinese semiconductor firms and leaked key DRAM process technologies. Five of them, who worked on the first and second development teams at ChangXin Memory Technologies (CXMT), were taken into custody. Investigators determined that the group systematically leaked Samsung’s 10-nanometer DRAM process technology, a national core technology achieved through years of investment. Samsung spent roughly $1.2 billion over five years to develop this technology.

Since its establishment in 2016, CXMT has aggressively recruited key Samsung personnel to secure technological capabilities. Authorities confirmed that one senior Samsung researcher manually transcribed hundreds of process steps before departing the company. The technology acquisition strategy was methodical and prolonged, involving the creation of shell companies to circumvent employment restrictions and staged transfers to CXMT’s Chinese headquarters. Compensation packages reportedly ranged from two to four times prior salaries, with some senior hires offered payouts amounting to tens of millions of dollars.

Through such organized technology appropriation, CXMT overcame early-stage capability gaps and yield challenges, achieving mass production of 10-nanometer-class DRAM in 2023—the first in China and the fourth globally. Investigators also uncovered evidence that CXMT obtained additional national core DRAM process technologies from SK hynix via partner firms. Having secured core technologies from both Samsung and SK hynix, CXMT rapidly expanded its presence in the global DRAM market, emerging as a central pillar of China’s semiconductor industry push for technological self-sufficiency. Prosecutors estimate the resulting economic damage at a minimum of tens of billions of dollars, concluding that Samsung alone suffered multi-billion-dollar revenue losses and that, absent the technology leakage, domestic firms would likely have captured much of the production and export volumes now held by CXMT.