Taiwanese prosecutors indicted a former TSMC deputy manager on Monday for allegedly copying 21 confidential documents, some covering technologies Taiwan designates as national core technologies, intending to use them in China. Prosecutors are seeking a sentence of up to seven years for the man, surnamed Chen, who has been detained since late May, and describe the indictment as the first under Taiwan's National Security Act to involve an alleged attempt to leak the island's most sensitive chip technologies to China.

However, that alleged transfer never happened. TSMC's internal monitoring systems flagged irregularities, with the company reportedly recovering every improperly copied document after its own investigation, according to the prosecutors' office. A High Prosecutors' Office spokesperson told Nikkei Asia that despite the failed attempt, the case "remains highly significant" as the first of its kind.

Prosecutors found Chen while investigating a separate Chinese espionage case centered on a Hong Kong national named Ding Xiaohu, Taiwan's Central News Agency reported. Investigators allege Ding was acting on instructions from the Nanning station of the Chinese Communist Party's Central Military Commission Political Work Department, entering Taiwan repeatedly to recruit agents and collect intelligence on the island's critical technologies, and that he recruited Chen through an intermediary surnamed Huang. Ding died earlier this year and was never charged.

Chen and Ding allegedly worked together between May 2023 and February 2024 to set up CSMAC, a semiconductor materials analysis company in China. Chen drafted several proposals for the venture, including one called the "Blue Ocean Plan" that aimed to recruit workers from Taiwan's chip industry to join CSMAC, and took the copied TSMC documents home to study for use in China, prosecutors said.

The state-directed recruitment allegation separates this case from the trade secrets disputes TSMC has fought over the past year, which involved employees allegedly taking confidential data to other chip industry employers.

Taiwan's National Security Act, in force since 2022, makes it a crime to copy, use, or disclose trade secrets tied to designated national core technologies, a list that includes chipmaking processes more advanced than 14nm. Prosecutors brought the first charges under the law last August, when three current and former TSMC employees were arrested over an alleged attempt to leak 2nm process data. That case grew to ensnare Tokyo Electron's Taiwanese unit, which prosecutors charged with failing to prevent the theft.

TSMC is also pursuing a civil case against Wei-Jen Lo, the former R&D executive who joined Intel last year, with Taiwanese authorities running a parallel national security inquiry into his departure.