The 2nm Race: Semiconductor Supply Chain Risks and Corporate Governance in Japanese-Taiwanese Partnerships

The global semiconductor industry is at a pivotal juncture, with the 2nm node representing the next frontier in chip manufacturing. As Japan and Taiwan navigate this high-stakes race, their partnerships are shaped by a delicate balance of innovation, geopolitical strategy, and corporate governance. The recent TSMC-Tokyo Electron (TEL) IP leak case [1] has exposed vulnerabilities in supply chain security and underscored the critical role of trust-building mechanisms in sustaining long-term competitive advantage.

Supply Chain Vulnerabilities and IP Protection

The 2nm process, which employs gate-all-around (GAA) transistors to improve power efficiency by 35% compared to 3nm nodes [1], is a strategic asset for both TSMC and Japan’s Rapidus. However, the alleged theft of 400 technical photos by TSMC employees—potentially shared with Rapidus or TEL—has raised alarms about the fragility of IP protections [2]. TSMC’s compartmentalized security strategy, while deemed “not critical” by a senior official [2], has been challenged by the incident, which highlights the risks of insider threats and digital infrastructure exposure [4].

Japan’s Rapidus, backed by ¥10 trillion ($65 billion) in government support by 2030 [5], is leveraging partnerships with IBM and Imec to develop its 2nm roadmap. Yet, its reliance on TSMC and TEL for equipment and expertise creates a paradox: collaboration is essential for technological advancement, but it also increases exposure to IP risks. TSMC’s legal action under Taiwan’s 2022 National Security Act—carrying penalties of up to 12 years in prison and NT$100 million in fines [1]—reflects a hardening stance on IP theft, signaling to partners that governance frameworks must evolve to deter such breaches.

Corporate Governance and Trust-Building

Robust corporate governance is emerging as a cornerstone of trust in these partnerships. TSMC’s Trade Secret Registration System and AI-driven monitoring protocols [3] exemplify a proactive approach to IP protection. Meanwhile, Japan’s emphasis on AI-powered IP surveillance and stricter non-disclosure agreements (NDAs) [1] demonstrates a parallel commitment to securing sensitive data. These measures are critical in an industry where talent mobility and digital infrastructure create significant exposure [4].

The TSMC-TEL case also reveals the importance of aligning governance structures with geopolitical realities. Japan’s strategy to localize 30% of semiconductor material production by 2030 [1] and Taiwan’s pledge to keep 2nm/1.6nm manufacturing within its borders [2] reflect a shared recognition of semiconductors as critical infrastructure. However, U.S. export controls and CFIUS restrictions on foreign investments [1] are forcing Japanese firms to diversify supply chains, complicating efforts to build trust with Taiwanese partners.

Long-Term Competitive Advantage

The 2nm race is not just a technological contest but a test of governance resilience. Rapidus’s goal to achieve mass production by 2027 [5] hinges on overcoming the “Valley of Death” between prototyping and commercialization. Its partnerships with Broadcom and Silicon Valley engagement [4] are strategic moves to build credibility and secure a customer base in a market dominated by TSMC and Samsung. Yet, without a governance framework that prioritizes IP transparency and mutual accountability, Rapidus risks replicating the vulnerabilities that have plagued Japan’s semiconductor industry historically [4].

For TSMC, the incident has accelerated calls for tighter regulatory oversight and investment in IP protection [1]. The company’s financial resilience—evidenced by a 61% year-on-year net income increase in Q2 2025 [4]—suggests it can weather short-term risks. However, its long-term dominance depends on maintaining trust with global partners, particularly as the U.S.-Japan collaboration to develop 2nm technology [5] intensifies competition.

Conclusion

The Japanese-Taiwanese semiconductor partnership is a microcosm of the broader global struggle to balance innovation with security. As the 2nm node becomes a battleground for technological supremacy, the ability to build trust through governance frameworks—encompassing legal rigor, AI-driven IP monitoring, and geopolitical alignment—will determine which players emerge as leaders. For investors, the key takeaway is clear: long-term competitive advantage in the 2nm race will belong to those who prioritize not just technological prowess, but the institutional safeguards that protect it.

**Source:[1] The Semiconductor IP Crisis: Assessing TSMC's Trade Secret Case [https://www.ainvest.com/news/semiconductor-ip-crisis-assessing-tsmc-trade-secret-case-ripple-effects-tokyo-electron-global-chip-equipment-sector-2508/][2] TSMC's 2nm leak is considered 'not critical' — senior gov't official says company secrets are compartmentalized and unusable in parts [https://www.tomshardware.com/tech-industry/semiconductors/tsmcs-2nm-leak-is-considered-not-critical-senior-govt-official-says-company-secrets-are-compartmentalized-and-unusable-in-parts][3] [News] TSMC's 2nm Leak Case: Inside Taiwan's Chip Protection Strategy from Patents to Trade Secrets [https://www.trendforce.com/news/2025/08/07/news-tsmcs-2nm-leak-case-inside-taiwans-chip-protection-strategy-from-patents-to-trade-secrets/][4] TSMC's Trade Secret Breach: Assessing Long-Term Risks [https://www.ainvest.com/news/tsmc-trade-secret-breach-assessing-long-term-risks-global-semiconductor-investment-strategies-2508/][5] Japan Revives Its Chip Industry [https://www.global-imi.com/blog/japan-revives-its-chip-industry]