A trade secrets investigation in Taiwan involving semiconductor giant Taiwan Semiconductor Manufacturing Co (TSMC) has cast an unexpected spotlight on Japanese chipmaking equipment supplier Tokyo Electron, following the arrest of one of its former employees.
The inquiry, launched by Taiwanese prosecutors, centres around the suspected theft of proprietary chip technology. Among the six individuals detained is a former staff member of Tokyo Electron’s Taipei branch. The incident has raised concerns for the Japanese company, which now faces the challenge of managing strained ties with one of its most valuable clients, TSMC, as well as navigating reputational risks with authorities in both Taiwan and Japan.
Tokyo Electron responds to the investigation
Tokyo Electron has confirmed that it terminated the employee in question and is fully cooperating with the authorities during the investigation. The company declined to comment further, citing the case’s status under judicial review. It also stated that, to date, there is no evidence that any trade secrets were transferred to external parties.
Despite these reassurances, Tokyo Electron’s shares fell 2.5 per cent on Thursday, reaching their lowest level since late April. The company held internal meetings this week, where employees were instructed not to discuss the matter. Company executives have reportedly travelled to Taiwan to address the situation directly.
The arrest has prompted industry experts to question what might have motivated the former employee’s alleged actions and whether it could be linked to Japan’s semiconductor ambitions. Atsushi Osanai, a professor at Waseda University, commented: “The fact that Tokyo Electron has come under the spotlight in this way feels like an unfortunate accident.”
Taiwan’s leading role in global semiconductor manufacturing has made it a frequent target for industrial espionage. With China aiming to boost its domestic chip production, Taiwanese companies are increasingly vulnerable to intellectual property theft, often suspected to involve Chinese interests. However, Taiwanese prosecutors have not yet provided specifics about the alleged perpetrators behind this case.
Industry impact and broader context
Tokyo Electron is a key supplier of equipment to the world’s major chipmakers, including TSMC, Samsung Electronics, and Intel. The company manufactures the specialised tools used to coat, etch, process, and clean silicon wafers during chip production. It operates alongside other major players in the semiconductor equipment sector, such as Applied Materials and Lam Research.
Given Tokyo Electron’s central role in the industry, analysts have expressed scepticism about its potential involvement in intellectual property theft. CEO Toshiki Kawai has previously emphasised that the company works closely with clients to access long-term technology roadmaps, which helps develop tailored solutions and maintain a competitive advantage. Any misconduct would seriously endanger this level of collaboration, particularly with TSMC, which is considered its most critical customer.
“TSMC is Tokyo Electron’s most important customer and the central player in the semiconductor industry,” said Osanai. “It’s hard to imagine that the company would risk losing all of that by engaging in any wrongdoing.”
Challenges amid geopolitical tensions
The investigation comes at a time of mounting pressure on Tokyo Electron due to geopolitical tensions and shifting market dynamics. Like many Japanese firms, the company is caught between the competing interests of the United States and China, its two largest markets.
Roughly 40 per cent of Tokyo Electron’s sales come from China. However, that segment has been hit by US export restrictions, which prevent the company from supplying some of its most advanced equipment to Chinese customers. At the same time, China is heavily investing in developing local semiconductor capabilities, potentially reducing future demand for foreign suppliers.
Adding to its difficulties, Tokyo Electron’s share price recently fell by 18 per cent after the firm cut its earnings forecast due to order cancellations and reduced demand from China. The timing of the current controversy exacerbates these challenges, placing further pressure on the company’s leadership.
