On August 7, Japanese semiconductor equipment giant Tokyo Electron (TEL) confirmed that one of its employees was involved in the leak of confidential 2nm process technology from TSMC. In a formal statement, TEL announced it had immediately dismissed the employee and is fully cooperating with the ongoing judicial investigation. Meanwhile, Taiwanese media reported further details about the case, including an unprecedented internal disciplinary action at TSMC described as "five levels of collective punishment."

TEL Confirms Leak, Fires Employee

TEL's statement reads:"As of August 5, 2025, we have confirmed that the case announced by the Taiwan High Prosecutors Office's Intellectual Property Division involves a former employee of our subsidiary, Tokyo Electron Taiwan Ltd. At TEL, we are unwavering in our commitment to the highest standards of legal compliance and ethical conduct. We maintain a zero-tolerance policy toward violations. Disciplinary action has been taken, and the employee has been dismissed. We are cooperating fully with the authorities."

TEL added that based on its internal investigation, there is no current evidence that any confidential information was shared with third parties. "As this case is under judicial review, we are unable to provide further details at this time," the company noted.

9 Suspects Identified, 3 Engineers Arrested

According to reports from Nikkei Asia, Economic Daily News, and Mirror Media, the leak occurred just as TSMC's 2nm process was approaching mass production. Multiple current and former employees were allegedly involved in stealing critical process information and leaking it to a TEL employee.

The Taiwan High Prosecutors Office said that between July 25 and 28, prosecutors directed raids on six locations and questioned nine suspects. Six engineers, including a former TSMC employee surnamed Chen and two current employees surnamed Wu and Ke, were taken in for questioning. Three were formally arrested and placed under detention, including Chen and Wu.

Investigators discovered that Chen had taken over 700 photos of process documents from Wu's computer and nearly 300 more from Ke's. Other engineers provided lower-sensitivity images and were not detained.

Insider Background: High Achievers from Top Schools

The three detained engineers were all graduates of National Tsing Hua University in Taiwan and reportedly had families. Chen, a materials engineering graduate, worked at TSMC for three years on advanced nodes (N5, N4, N3) before joining TEL in December 2022. Wu, with a chemistry background, worked at TSMC for eight years in etching and yield improvement. Ke held dual degrees in chemistry and materials science.

After joining TEL, Chen allegedly colluded with Wu, Ke, and other employees to steal sensitive technology.

TSMC's cybersecurity team first discovered abnormal logins from a Starbucks store near the Hsinchu Science Park. Surveillance footage helped trace the leak back to Chen. Legal teams from TSMC involved TEL in the investigation, leading to the discovery of leaked files on Chen's devices, which had been submitted to his supervisor—confirming TEL's connection.

Sudden Wealth Raises Red Flags

Investigators also found that one of the arrested engineers had suddenly acquired nearly NT$100 million (over USD $3 million) in cash and had purchased two luxury properties in Hsinchu within a year. Authorities are now tracking financial records to uncover potential masterminds behind the leak.

Prosecutors are working to identify what specific data was leaked, to whom, and for what purpose—investigating whether this was an isolated act driven by money or part of an organized espionage scheme. Analysts believe the details will weigh heavily in sentencing, with the suspects facing steep criminal penalties, fines, and civil compensation claims.

Given the involvement of TEL, further searches or interviews with company personnel may follow.

TSMC Responds with Massive Internal Disciplinary Measures

Following the leak, TSMC reportedly imposed the strictest disciplinary measures in its history, described internally as "five levels of collective punishment," potentially impacting high-level executives. Some insiders claim that only Chairman Mark Liu was unaffected.

The incident has raised questions about long-standing vulnerabilities. Sources say that remote access during the COVID-19 pandemic may have created security gaps, and TSMC's cybersecurity team may have seen leaked content before tracing its origin.

TSMC's technology is considered its crown jewel. Chairman Mark Liu previously told shareholders that TSMC's know-how is the result of tens of thousands of engineers' work and cannot be easily stolen. However, this breach highlights that even TSMC's comprehensive security systems aren't foolproof.

Industry watchers are now calling for TSMC to enhance internal controls, raise employee awareness of legal consequences, and take stronger steps to prevent future leaks.