TOKYO: An attempted theft of trade secrets from the world’s largest chipmaker, along with renewed tariff threats on semiconductors, may be testing Taiwan’s “silicon shield.” But it hasn’t cracked under pressure just yet.
The burden on TSMC is heavy—everyone wants a piece of its cutting-edge technology. Less than 24 hours after reports surfaced that TSMC had fired several employees over a suspected attempt to steal critical manufacturing info, US President Donald Trump ramped up tensions by threatening new tariffs on chips, potentially as high as 100%.
On Thursday, Taiwan confirmed that TSMC would be exempt from the latest round of tariffs, thanks to its US investments. However, Trump sparked confusion by claiming that Taiwan was “spending US$300 billion in Arizona to build the world’s largest plant,” when TSMC had previously committed only US$165 billion. This raised questions about whether talks were still ongoing.
Trump likely understood that imposing steep tariffs on TSMC could harm US tech giants like Nvidia and Apple—some of TSMC’s biggest customers. Such tariffs would also undermine the ambitious AI infrastructure plans Trump unveiled earlier this year, which depend heavily on advanced chips.
After the tariff exemption announcement, TSMC’s stock hit a new record high on Thursday.
Despite TSMC’s US expansion efforts, not everyone in Taiwan is on board. Some believe the company should keep its core technologies on the island as a safeguard against potential aggression from Beijing. But expanding into the US could solidify Taiwan’s ties with Washington and increase TSMC’s global footprint. Moreover, both TSMC and Silicon Valley are united in their opposition to China.
Espionage: More Than Just Corporate Theft
However, tariffs may not be TSMC’s biggest worry. The espionage case has the potential to escalate into something far more serious than a routine intellectual property theft. Under investigation by Taiwan’s national security authorities, the case could spark broader geopolitical tensions.
At this point, many details remain unclear. The extent of the leak, the identity of the culprit, and the motives behind the attempt have not been disclosed. TSMC has stated it identified the issue “early.”
On Thursday, Tokyo Electron confirmed that a former employee was implicated in the case, though no evidence has been found yet to suggest the stolen information was shared with a third party. Local authorities have arrested several individuals, and it appears the targeted data pertains to TSMC’s cutting-edge 2-nanometer production—the most advanced chip technology globally.
TSMC is one of only a few companies, including Samsung, Intel, and Japan’s Rapidus, working to mass-produce these state-of-the-art chips. These firms share suppliers like Tokyo Electron, making the theft even more complex.
Developing 2-nanometer chips requires an astronomical investment in research, development, and specialized manufacturing facilities. The barriers to entry are so high that only a select few companies are capable of even attempting to compete in this space. Taiwan and TSMC have spent decades building this dominance, and there are no shortcuts, even for those willing to engage in unethical tactics.
TSMC’s Edge is Vital
The significance of TSMC’s technological edge cannot be overstated. Nearly 24% of its most recent quarterly revenue came from its 3-nanometer chips, and demand for even more advanced nodes is already soaring. TSMC’s dominance enables it to dictate prices, even amidst a tough foreign exchange environment and ongoing trade volatility.
This technological advantage has not only been crucial for TSMC’s business success but also provides Taiwan’s government with leverage in international diplomacy, often referred to as “semiconductor diplomacy.” The potential espionage case gives fresh ammunition to critics of President Lai Ching-te, who’s facing political challenges.
As the first major chips-related case involving Taiwan’s National Security Act, authorities must fully investigate and take action, setting a strong precedent for the future.
As my colleague Howard Chua-Eoan has noted, history has shown that technological monopolies and secrets are rarely permanent. For now, however, TSMC remains at the heart of the global AI boom. Despite the threat of tariffs and espionage, its crown is still secure.
