Taiwan has launched trade secrets investigations inside its chip sector under its wider national security rules, and the focus has shocked everyone on the island.

The first targets are not companies from China. Instead, prosecutors are looking at Tokyo Electron and Intel, two partners that Taiwan usually calls allies.

The move has triggered questions about how far the island is ready to go to shield its core chip technology at a time when global politics keeps shifting.

Prosecutors said last week that they charged the local arm of Tokyo Electron for failing to stop alleged technology theft tied to TSMC.

Days before that, investigators searched two homes linked to Lo Wei-jen, a former TSMC executive who left the company in July and joined Intel. Prosecutors said the raid was tied to concerns that Lo may have shared “national core critical technology” with his new employer.

TSMC had already sued him for breaking a non-compete deal, saying it believed there was a strong chance he “uses, leaks, discloses, delivers or transfers TSMC’s trade secrets and confidential information to Intel.”

Taiwan probes allies after fears over shifting US politics

Legal and industry voices in Taiwan said they were glad authorities were finally taking these threats seriously because TSMC’s technology keeps the island central in the global economy.

TSMC is still the world’s biggest chipmaker and the main source of the most advanced chips used everywhere, from data centers to AI servers. But the surprise came from the direction of the investigations.

China has long been labeled the main source of technology theft, yet these early cases point to Tokyo Electron, which supplies chip tools, and Intel, which buys TSMC chips and also competes with it.

People in Taipei said the timing was linked to worries about the strength of the island’s main security partner, the US. Officials have been on edge after Donald Trump said he wanted a “deal” with China and claimed Taiwan had been “stealing” US chip business while depending on American defense support.

One Taiwanese chip executive working in the US allegedly said the situation felt like a “man bites dog” moment because the probes hit companies that do not fit the usual threat story. Taipei’s actions could also place its geopolitical ties at risk, and it really cannot afford to provoke Trump right now. Not while they still need protection against the long arm of Xi Jinping.

Investigators pursue cases as political tension rises

TSMC, under pressure from the Trump administration earlier this year, boosted its US investment plan from $65bn to $165bn. Even then, US officials said they want half of all chip production built on US soil, far beyond what TSMC can deliver.

In August, Washington agreed to buy a 10% stake in Intel in a move to rebuild the struggling American firm into a national champion.

Prosecutors have not accused Intel of wrongdoing and said the investigation is only about Lo. But analysts said Washington could still push Taipei if the case becomes uncomfortable for US interests.

James Chen, a professor at Tamkang University in Taipei, said Taiwan has “very limited options to refuse US requests and pressure” because it is trying to cut Washington’s 20% tariff on Taiwanese exports and secure support for President Lai Ching-te as he takes a stronger line against China.

The 2022 rules that created this legal framework were designed to stop leaks of “national core critical technology,” especially to China.

Taiwan has seen engineers move to Chinese chipmakers for years, including Liang Mong-song, who joined SMIC in 2017 and is now co-CEO. He and others who left TSMC helped SMIC close parts of its technology gap.

The updated law carries bigger fines for leaks to China than to partners like Japan or the US. Even so, experts said it still misses parts of what the government wanted.

Former president Tsai Ing-wen once pushed for broad powers allowing the state to initiate cases itself. Parliament instead passed a version similar to the US Economic Espionage Act. That means prosecutors can only act when a Taiwanese company files a complaint.

Investigators now must build strong cases.

In the Tokyo Electron matter, prosecutors have already charged former TSMC workers for stealing technology, but the charge against the company only says it failed to stop the behavior. Jeremy Chang, who leads an institute under Taiwan’s tech ministry, said the case sets a clear rule that companies must build tighter compliance programs.

Tokyo Electron said the indictment does not say it told anyone to steal technology and promised to improve its controls. Intel said it does not allow its teams to use outside technology and saw no reason to think the claims against Lo had merit.

Observers said political pressure could appear behind the scenes as Taipei focuses on keeping US support.

Chen said, “The government might have some thoughts of intervening or using leverage, but they cannot directly intervene in the judicial system.” He added that the matter is now “very politicised and sensitive.”

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