Taiwan authorities are concerned that TSMC’s expansion into the U.S. market could weaken Taiwan’s leadership in the semiconductor industry, and are therefore considering a new export rule that would allow the world’s largest foundry to export only technologies that are two generations behind its most advanced production nodes. If implemented, this policy could slow TSMC’s expansion in the United States, as the company is currently building advanced wafer fabs there.
The core of the proposed export policy is the so-called “N-2” rule, which would permit overseas deployment only of process technologies that lag Taiwan’s leading-edge technology by two generations. Previously, Taiwan authorities adhered to an “N-1” rule, allowing TSMC to export any technology that was at least one generation behind its most advanced manufacturing process. The new framework is more restrictive. Depending on how technology generations are defined, TSMC may only be allowed to export process nodes that are 2 to 4 years behind its most advanced technology.
Lin Fa-cheng, a member of Taiwan’s Science and Technology Council, stated that under this classification, if TSMC were to develop 1.2nm or 1.4nm-class process technology on the island, only process products at 1.6nm and above would be permitted for overseas export.
Currently, TSMC’s Fab 21 Phase 1 facility in Arizona is capable of producing chips using the N4/N5 process nodes (4nm/5nm, which are considered the same generation). In Taiwan, TSMC operates multiple fully ramped fabs with 3nm-class process capabilities (such as N3B, N3E, and N3P), and is preparing to begin mass production of N2 (2nm) process chips. On the surface, Fab 21 Phase 1 already complies with the “N-2” rule. However, if TSMC begins producing 3nm process chips at Fab 21 Phase 2 in 2027, the facility would no longer comply with the “N-2” rule, as the N3 process is only one generation behind N2/N2P/A16 technologies. Although the A16 (1.6nm) process is an enhanced version of N2P (2nm) with backside power delivery, if A16 is classified as a new generation, Fab 21 Phase 2 would then comply with the new high-tech export framework.
Mr. Lin also emphasized that most of TSMC’s R&D personnel remain in Taiwan, noting that the company’s research and development layout meets regulatory requirements. In practice, this concentration of engineers and scientists ensures that future process development remains rooted in Taiwan, even as the company builds production capacity and R&D centers overseas. He further noted that all qualified personnel in the semiconductor industry are subject to oversight, extending the scope of intellectual property and hardware protection to human capital.
In addition, Zou Yu-hsin, Deputy Director-General of the Industrial Development Bureau under Taiwan’s Ministry of Economic Affairs, stated that any future TSMC investments in the United States will be reviewed in accordance with existing laws, and projects exceeding certain thresholds must be examined by the Investment Commission of the Ministry of Economic Affairs.