Espionage Scandal Rocks TSMC as U.S. Operations Face Profit Collapse

Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading chipmaker, finds itself navigating dual crises as a major corporate espionage investigation unfolds alongside severe profitability challenges at its American facilities.

Former Executive Accused of Stealing Critical Secrets

Taiwanese prosecutors have launched a formal investigation into former TSMC vice president Lo Wei-jen, who stands accused of removing over 80 boxes containing highly sensitive technical documents after 21 years with the company. The materials allegedly included proprietary information about TSMC’s groundbreaking 2-nanometer, A16, and A14 process technologies. Adding to concerns, Lo unexpectedly joined U.S. competitor Intel in late October, raising suspicions that critical semiconductor secrets may have been transferred to a direct rival.

The case has escalated to involve Taiwan’s Ministry of Economic Affairs, which is examining potential violations of the National Security Law. This development underscores the intense technological competition within the global semiconductor sector and highlights the strategic importance of chip manufacturing to Taiwan’s industrial development.

American Operations Report Dramatic Earnings Decline

While TSMC recently celebrated the symbolic production of its first Nvidia Blackwell wafer in Arizona, financial reports revealed a starkly different story. The company’s U.S. subsidiary experienced a devastating 99% profit collapse during the third quarter, plummeting from $4.2 billion to a mere $1.3 million. Company officials attribute this dramatic downturn to typical startup challenges, including elevated initial operating expenses, significant employee training costs, and an underdeveloped local supply chain.

Should investors sell immediately? Or is it worth buying TSMC?

Despite these setbacks, the American operations represent only a minor portion of TSMC’s overall business. The parent company reported strong operational profits of 500.7 billion Taiwanese dollars during the same quarter, reflecting an 8% increase from the previous quarter.

Market Analysts Maintain Confidence in TSMC’s Position

Leading financial institutions continue to express optimism about TSMC’s long-term prospects despite current challenges. Bank of America has reaffirmed its buy rating for TSMC shares with a price target of $390. Market experts point to the company’s dominant position in advanced semiconductor manufacturing and its commitment to capacity expansion, evidenced by a budgeted $14.98 billion for facility development.

The banking institution projects TSMC will maintain gross margins around 60% through 2027, supported by its market leadership and sustained demand for artificial intelligence technologies. Although revenue growth moderated to 16.9% year-over-year in October, compared to 31.4% in September, the overall financial outlook remains positive.

Critical Tests Ahead for Semiconductor Leader

The fourth quarter earnings report scheduled for January 2026 will serve as a crucial indicator of TSMC’s ability to overcome its current challenges. This disclosure will reveal whether the company has successfully addressed profitability issues in its U.S. operations and whether the espionage investigation has materially impacted business performance. Despite facing significant headwinds, TSMC maintains a fundamentally strong market position, with AI-driven demand continuing to fuel utilization rates at its most advanced manufacturing facilities.