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TSMC is taking no chances with security at its new Nanjing plant

Executive outlines how the Taiwanese chip giant will keep it secrets out of Beijing's hands

TSMC Chief Information Officer Steve Tso, second from right, told a tech forum on Nov. 15 about the security measures being taken at the company's new chip production center in Nanjing, China.

HSINCHU, Taiwan Even the extensive security measures devised by Taiwan Semiconductor Manufacturing Co. for its new chipmaking plant in mainland China might not guarantee that advanced technology leaks stay out of China's hands, Chief Information Officer Steve Tso has acknowledged.

"For our new chip facility in [the eastern] Chinese city of Nanjing, IT security is what we are really worried about and spending a lot of effort on," Tso said at a forum hosted by the Taiwan Semiconductor Industry Association on Nov. 15. Global technology companies and officials in the West have voiced growing concerns about Beijing's aggressive moves to acquire advanced technology by various means.

"We have worked out a security protection plan with the assumption that all of our information going in and out of our [Nanjing] facility will be intercepted and copied," Tso said.

TSMC is the world's largest contract chipmaker by revenue. Its customers include the global tech giants Apple, Broadcom, Nvidia and Qualcomm. The Taiwanese manufacturer also serves several mainland companies, including Huawei Technologies' chip unit HiSilicon.

TSMC announced its plans for the facility in Nanjing in 2015. The plant is set to churn out advanced 16-nanometer chips, adopted by the iPhone 7 range, starting in the second half of 2018. Only TSMC, Samsung Electronics of South Korea and Intel of the U.S. possess 16nm or similar technology. No mainland Chinese counterpart is capable of making such advanced chips.

10% HIDDEN TSMC has two direct data transmission lines between a major site in Taiwan and the Nanjing plant, Tso said, adding that all the data will be fully encrypted and will cover automation and equipment, customer product information and production blueprints.

The company's information technology team will incorporate fake data into transmissions between its Taiwan and mainland sites to reduce the possibility of technology leaks, Tso said.

TSMC will store 90% of chip production information at local servers in China, but keep 10% of the data covering "the most critical and sensitive chip production technology" back in Taiwan, he said. The most sensitive information will be sent to Nanjing on a need-to-know basis, with the material rendered inaccessible after one-time use, according to the executive.

The chipmaker also has adopted isolated firewalls in both Taiwan and mainland China to prevent Nanjing staffers from retrieving and stealing data from Taiwan, he added.

"However, we are afraid that such defense of information security is not yet enough," Tso warned, "and we are still working hard to see how we can make the system free from any leaks."

ANY WAY CHINA CAN TSMC is not the only major global chipmaker with operations in the rapidly growing Chinese market. Intel operates a NAND flash memory chip plant in the northern Chinese city of Dalian, while fellow U.S. company Globalfoundries is building a chip factory in central China's Chengdu through a partnership with the local government. Samsung and South Korean compatriot SK Hynix are expanding memory chip plants in Xi'an and Wuxi, respectively.

China is working relentlessly to develop a competitive chip industry to replace foreign suppliers, devoting money from the central and local governments and attracting overseas talent. The New York Times reported in early November that U.S. chipmaker Advanced Micro Devices is licensing its technology to Chinese partners, instead of selling designs directly, to avoid scrutiny by Washington. The American chipmaker also is helping its Chinese partners build semiconductor prowess through a joint venture.

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