TSMC Response Identifies More SMIC Espionage

Taiwan Semiconductor Manufacturing Company (TSMC) disclosed new evidence of corporate espionage on the part of SMIC in opposition papers filed in U.S. Federal Court yesterday. The new evidence includes eyewitness affidavits and new technical verification of trade secret misappropriation by SMIC.

In its filing, TSMC claimed that SMIC stole advanced semiconductor manufacturing technology and other trade secrets from TSMC and its U.S. affiliates. TSMC also claimed that SMIC lured away certain key employees with offers of SMIC stock and stock options. SMIC expected those employees to bring “presents” of TSMC’s latest proprietary technologies and improvements when they came to work for SMIC.

TSMC’s filing included affidavits of former SMIC engineers who personally witnessed SMIC’s misconduct. According to the filing, one witness estimated that 90 percent of SMIC’s 0.18-micron logic process was copied from TSMC. Other witnesses declared that SMIC attempted to disguise the origin of the information by internally referring to TSMC and its technology by the code name “BKM1,” referring to “Best Known Method 1”. Still another sworn statement reveals that SMIC’s use of TSMC technologies was “no secret” and was openly discussed by SMIC engineers.

In its original complaint, TSMC attached a copy of an email seized by the District Attorney in Hsinchu, Taiwan, that substantiated a solicitation by a SMIC corporate officer to a then-active TSMC employee. The document requested her to steal six TSMC process flows, together with process targets and equipment types; and concluded with the remark: “Sorry for the long list, but we need a lot of material to set up the new operation.” TSMC’s new evidence confirms that SMIC got what it asked for.

The most recent filing also states that TSMC verified SMIC’s use of stolen trade secrets through forensic examination of an SMIC manufactured device bought on the open market. That chip contains features that are strikingly similar to TSMC’s, but bearing little similarity to comparable features in a chip made by Chartered Semiconductor, SMIC’s only reported licensor of 0.18-micron logic processes.

These new disclosures contradict a recent SMIC public claim that TSMC’s trade secret suit is without merit. That claim was originally made by SMIC’s CFO, but was later retracted.

This new information came to light in TSMC’s opposition papers filed in the U.S. District Court of Northern California. This filing is in response to SMIC’s February 17th motion to dismiss TSMC’s trade secret misappropriation and unfair competition claims filed by TSMC. In that complaint, TSMC, TSMC North America and WaferTech alleged that SMIC improperly obtained their trade secrets and infringed TSMC patents.

In its opposition filing on Monday, TSMC advised the court that it is continuing its investigation and analysis and that it anticipates additional filings.