Taiwan Semiconductor Manufacturing Company (TSMC) is facing a high-profile internal security crisis after prosecutors confirmed arrests tied to the unauthorized access of its next-generation 2-nanometer (2 nm) chip data. The six individuals detained—comprising both current and former employees—were identified following routine monitoring that flagged suspicious activity late in July.

How It Unfolded

Between July 25 and 28, search warrants led to home inspections and interrogations connected to the suspected breach. Two suspects have since been released on bail, and one individual was later released outright. The Japan Times

Technology at Risk

TSMC’s 2 nm process is widely recognized as the industry’s most advanced in both energy efficiency and transistor density, and mass production is slated for later in 2025. Industry sources suggest that internal access logs and remote document copies—including photos taken via mobile phones—triggered the alarms.

Legal Landscape

This marks Taiwan’s first major case prosecuted under the 2022 amendment to its National Security Act, which now criminalizes unauthorized handling of “core” technologies—semiconductor nodes of 14 nm or smaller. Convictions carry prison terms of up to 12 years and fines exceeding US $3 million. TSMC has repeatedly reiterated its zero‑tolerance policy and pledged full cooperation with authorities.

Geopolitical Echoes

While initial speculation pointed to involvement by Chinese actors, follow-up investigations spotlighted ties to Japan. One former TSMC engineer arrested went on to join Tokyo Electron—TSMC’s equipment supplier—and allegedly shared confidential 2 nm process images via Rapidus, Japan’s nascent state-backed chip‑manufacturing initiative. Multiple reports indicate Tokyo Electron’s offices were among those searched by prosecutors.

Wider Implications

The incident reflects widening concerns over intellectual property protection in an era of intense chip rivalry. With demand surging from AI and high-performance computing sectors, TSMC’s proprietary technology is fiercely coveted by competitors in South Korea, Japan, and beyond. Taiwanese authorities are reportedly probing up to eight similar incidents within recent months. TSMC also recently landed a 300,000-unit H20 chipset deal from Nvidia, highlighting the stakes tied to safeguarding its lead.

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Summary

Key Point	Details
Arrests & Investigation	Six individuals detained; two on bail, one released
Compromised Tech	2 nm chip process, ahead of mass production in late 2025
Legal Context	First application of Taiwan’s updated National Security Act
Potential Leak Pathway	Connection to Tokyo Electron and Japan’s Rapidus program
Broader Risks	Multiple similar cases under investigation amid chip wars

TSMC has moved swiftly to terminate implicated employees, tighten internal monitoring, and reaffirm its commitment to protecting intellectual property. Meanwhile, investigators are working to trace exactly how far the leak may have spread and whether it has benefited major chip rivals.