Tokyo Electron Taiwan Hit With NT$150M Fine as Court Hands Ex-TSMC Engineer 10 Years for 2nm Etch Trade Secret Leak

By NineScrolls Team · 2026-04-28 · 5 min read · Industry

A Landmark Ruling Under Taiwan's National Security Act

On April 27, 2026, Taiwan's Intellectual Property and Commercial Court fined Tokyo Electron Taiwan NT$150 million (roughly US$4.6 million) and sentenced former TSMC engineer Chen Li-ming to 10 years in prison for leaking trade secrets tied to TSMC's 2-nanometer process. The court found Chen guilty of violating the National Security Act and related offenses involving the unauthorized acquisition and use of Taiwan's "national core key technologies."

According to the ruling, the case is the first in which a corporate entity has been penalized under Taiwan's National Security Act for offenses tied to national core key technologies. The fine against Tokyo Electron Taiwan can be suspended if the company pays NT$100 million in compensation to TSMC and NT$50 million to the public treasury.

Inside the Case: Etch Equipment at the Center

Chen, who previously worked in a yield engineering unit at TSMC's Fab 12, joined Tokyo Electron Taiwan's marketing division after leaving the chipmaker. Between the second half of 2023 and the first half of 2025, prosecutors say he repeatedly solicited confidential technical information from current TSMC engineers in a bid to help Tokyo Electron secure additional equipment supply positions for TSMC's most advanced process nodes.

The leaked materials specifically included trade secrets related to etching equipment used in 2nm production, photographed and reproduced so that Tokyo Electron could evaluate and improve its equipment performance, prosecutors said. TSMC's Fab 12 in Hsinchu and the company's 2nm sites in Baoshan and Kaohsiung run some of the most demanding plasma etch processes in the industry.

TSMC reported the case to authorities on July 8, 2025 after detecting irregularities through an internal investigation. Prosecutors followed with detentions and August 2025 indictments seeking prison terms of 14, nine, and seven years for the three primary engineers.

Sentences and Fines Across Five Defendants

Beyond Chen's 10-year sentence, the court sentenced TSMC engineer Chen Wei-chieh to six years for stealing trade secrets, and current TSMC engineers Wu Ping-chun and Ko Yi-ping to three years and two years, respectively. The ruling can be appealed.

Tokyo Electron Taiwan employee Lu Yi-yin received a 10-month sentence suspended for three years and was ordered to pay NT$1 million (about US$31,000) to the public treasury. Lu was separately indicted in January 2026 on additional charges involving destruction of evidence.

Tokyo Electron's Response and Cloud Storage Findings

Tokyo Electron, Japan's largest semiconductor equipment maker and one of TSMC's most important Japanese suppliers, said in a statement issued after last year's indictments that it had found no evidence TSMC's 2nm technology had been leaked to third parties, and stressed that it does not tolerate violations of law or ethics. The company has signaled that further discussions with TSMC and the court are underway.

Investigators, however, found that Tokyo Electron Taiwan's cloud storage still contained TSMC trade secret materials, including integrated circuit manufacturing technologies for nodes below 14nm and related equipment, gas, and chemical processes. Prosecutors argued the company failed to exercise adequate supervision over Chen and pursued corporate criminal liability under the National Security Act, originally seeking a NT$120 million fine — the court ultimately raised that figure to NT$150 million.

What It Means for the TSMC–TEL Equipment Relationship

Tokyo Electron is one of the top three global wafer fab equipment suppliers and a primary source of TSMC's plasma etch and coater/developer tools. The Japanese tool maker forecasts a fiscal 2026 wafer fab equipment market exceeding US$130 billion, with TSMC's 2nm ramp a major share of that demand.

While the verdict carries a relatively contained financial penalty, the precedent is far more significant: TSMC, supported by Taiwan's National Security Act, can now hold supplier corporations criminally liable for trade-secret governance failures. Industry observers expect TSMC to tighten audit controls on every major equipment vendor with engineers embedded at its 2nm and A14 nodes.

What This Means for Plasma Processing and Thin Film Deposition

The leaked trade secrets in this case were not abstract — they specifically targeted etching equipment performance at the 2nm node. That puts plasma processing tools, recipe development, and chamber engineering at the core of the dispute. Etch performance at gate-all-around (GAA) nanosheet nodes depends on tightly coupled hardware and recipe IP: dielectric isotropic etch profiles, selectivity to ALD-deposited liners, and atomic-layer-etch step control. Securing that IP is now a board-level concern at every major foundry-supplier interface.

For thin film deposition vendors — Applied Materials, Lam Research, ASM International, and Tokyo Electron itself — the ruling raises the bar for cross-licensed engineering data, embedded-engineer programs, and any form of "co-development" with leading-edge fabs. ALD precursor recipes, PECVD chamber configurations, and PVD target/source designs are all touchpoints where confidential foundry know-how can intermingle with supplier process data. Expect tighter NDAs, stricter cloud-storage segregation, and more aggressive post-employment monitoring across the deposition supply chain.

For the broader equipment supply chain — plasma sources, RF generators, mass flow controllers, gas delivery panels, vacuum components, sputter targets, and process monitoring systems — the case is a reminder that trade-secret enforcement now extends well beyond the wafer recipe. Subcomponent vendors and integrators that touch 2nm-class etch and deposition tools should expect TSMC and its peers to push compliance obligations downstream, with audits, escrow arrangements, and stronger penalties for engineers who switch employers across the foundry-tool boundary.