Taiwanese prosecutors indicted a former Taiwan Semiconductor Manufacturing Co. (TPE:2330) employee for allegedly stealing company trade secrets for use in China, according to a Monday press release from Taiwan's Ministry of Justice.
The defendant, identified only by the surname Chen, was charged with violating the National Security Act. Prosecutors allege Chen colluded with a Hong Kong resident, identified as Ding, between May 2023 and February 2024.
Under a scheme dubbed the "Blue Ocean Project," Chen and Ding established a mainland firm called China Semiconductor Materials Analysis (CSMAC). The operation allegedly poached Taiwanese talent to work at CSMAC and infiltrate the domestic semiconductor industry.
Prosecutors alleged that Chen stole 21 TSMC trade secrets and reproduced them in China. He was caught after TSMC launched an internal investigation and retrieved the illegally copied documents.
Prosecutors are seeking a seven-year prison sentence for Chen. Ding was not prosecuted because he has since died.
TSMC declined' request for comment on the matter.
The espionage charges come as TSMC expands its global footprint and technological edge.
The company aims to expand in the US by investing a further $100 billion to build more facilities in Arizona, taking its total investment plan in the state to $265 billion.
The added investment was announced after the company posted a 77% jump in its second-quarter net income to NT$706.6 billion from NT$398.3 billion a year earlier. Net sales during the quarter rose 36% year over year to NT$1.270 trillion from NT$933.8 billion.
The semiconductor fab recently announced plans to launch its next-generation A14 chip process in 2028. The nanosheet transistor technology will raise chip density by almost 20% and is anticipated to deliver a 10% to 15% speed improvement at the same power, or a 25% to 30% decrease in power consumption at the same speed, compared with its 2-nanometer process.
TSMC's shares rose 3% at midday trading in Taiwan.
