Three individuals, including current and former engineers, were arrested in Taiwan after allegedly stealing trade secrets from Taiwan Semiconductor Manufacturing Company (TSMC) (TSM), the chipmaker that dominates nearly 90% of the global advanced chip foundry market. Now the question is: does this scandal pose a serious threat to the company’s value, or is it a manageable blip?
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Here’s What Happened
TSMC reported suspicious activity after detecting unauthorized access to sensitive files during routine internal monitoring. That discovery led to an internal investigation, disciplinary actions, and legal proceedings. Taiwanese prosecutors say they have detained the suspects, one of whom has been publicly identified by surname only. Authorities have searched their homes as part of the probe.
While TSMC hasn’t disclosed the exact technology involved, reports suggest the information may relate to its next-generation 2-nanometer chip process. That’s a key development for the company, which is preparing to mass-produce those chips in the second half of this year.
How Important Are These Secrets?
TSMC’s edge in chip manufacturing comes from its ability to produce the smallest and most efficient semiconductors in the world. Its 2-nanometer process represents the next leap forward, and the company has invested heavily in perfecting it. Losing any intellectual property tied to that technology could give competitors a shortcut and reduce the company’s competitive moat.
That said, the company acted quickly. It caught the suspicious activity early, began disciplinary action, and notified prosecutors. There’s no indication so far that the stolen material was transferred overseas or used by rival companies.
Could This Hurt TSMC’s Stock?
Right now, there’s no obvious impact on TSMC’s production or relationships with major clients like Apple (AAPL) and Nvidia (NVDA). The company remains on track with its development timeline. However, any material compromise of trade secrets could shift investor sentiment, especially if evidence emerges that the information was shared or sold to competitors.
So far, investors appear unfazed. TSMC shares have not seen a significant dip since the news broke. That could mean the market is treating this as a manageable internal security breach, not a major competitive risk.
Is TSMC a Buy, Sell, or Hold?
Despite the recent trade secret scandal, Wall Street analysts remain confident in Taiwan Semiconductor Manufacturing Company. According to data from the past three months, seven analysts have rated the stock, with six recommending a Buy, one saying Hold, and none suggesting a Sell. That gives TSMC a Strong Buy rating overall.
On price targets, the average TSM 12-month price target is $267.57, which would be a 13.6% upside from the current share price of $235.58.
