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Lawsuit Against Former TSMC Director Upheld By Court

August 27, 2015 - Written By David Steele

Until relatively recently, the mobile industry’s default System-on-Chip process size was set at 28nm. We have seen a number of Intel Atom chipsets released with a 22nm process size and in the last year, both Samsung and Apple released devices using a 20nm process size. The process size is important to the industry because the smaller the component, the less the voltage needed in order to drive the electronics because of the shorter distance required to jump between circuits. Power consumption is proportional to the square of the voltage applied, so a relatively small drop in voltage causes a disproportionately large impact on power consumption and heat produced. Furthermore, the shorter the distance between components, the theoretically quicker the device is. As such, developing and selling chips at a smaller process size is a means of improving the product and this brings me to today’s story, which concerns the former generation of 28nm process chips.

Back in 2009, Liang Mong-song, a senior director of research and development at the Advanced Modules Technology Division of Taiwan Semiconductor Manufacturing Company (or TSMC) resigned from his post. At the time, Liang cited that he wished to spend more time with his parents and go into teaching. His employment contract contained an anti-competitive clause that meant if he worked for a competitor inside two years, he would forego half of the stock awarded as a bonus. Liang started teaching for the Sungkyunkwan University, which has strong ties with Samsung, but assured his former employer that there was nothing untoward going on. Roll forward those two years into 2011 and after Liang received his full TSMC stock bonus, he started working for Samsung via their System LSI Division, joining as the Chief Technology Officer – able to do so now that his competition clause had expired, which seems a reasonable assumption.

However, the semiconductor industry is a cut-throat business and TSMC sued Liang with a claim that he leaked business trade secrets to his new employer, Samsung. Indeed, TSMC sued twice as it happens and these lawsuits alleged that Liang leaked details of TSCM’s 28nm process designs and these helped Samsung catch up with the rest of the semiconductor industry. Ultimately, Samsung gained a competitive advantage by applying this illicitly acquired knowledge and were able to shrink their process size. Regular readers will have seen that Samsung’s current generation 14nm Exynos 7420 is arguably the finest System-on-Chip currently available. TSMC is ultimately saying (whispering) that some of Samsung’s chipset success is derived from their trade secrets acquired from 2009 via a former employee. However, against Liang, TSMC won both cases and the last one was completed in Spring 2014. The results of this case forbade him from working for Samsung until the end of 2015. Liang appealed this decision and today’s news is that the Taiwan Supreme Court has upheld this earlier court’s decision: Liang indeed is unable to work for Samsung until the 31 December this year and must not leak any of TSMC’s trade secrets.

This is an unprecedented move as Liang’s anti-competition clause expired in 2011 and remember; Liang last worked for TSMC in 2009. Wellington Ku, Liang’s lawyer, said in an interview with a news channel that the decision to stop his client from working for a rival company would be sure to generate controversy given that the anti-competition clause expired in 2011. And whilst the chip industry has moved on since then, even taking into account that Liang would have been aware of TSMC’s up and coming projects, one has to question how relevant a six-year-old product knowledge is in today’s semiconductor industry? Meanwhile, TSMC has not directly sued Samsung (presumably because Samsung has a well prepared legal team thanks to Apple) but has hinted that it may file further cases against Liang. The semiconductor industry is fickle at the best of times: technology evolves at a rapid pace and the 28nm has now been superseded by 20nm, 16nm and 14nm processors. Apple, one of the major purchasers of the industry, has switched first to and then from Samsung and TSMC to supply their processors for the iPhone and iPad. TSMC’s victory over a Samsung employee perhaps illustrates the lengths a business will go to in order to punish an individual and a competitor for stealing its ideas.