Taiwanese authorities are considering a stringent new export control policy aimed at preserving the island’s semiconductor leadership. The proposed “N-2” rule would restrict global foundry leader TSMC from exporting technology more advanced than two generations behind its leading-edge nodes from Taiwan to its overseas facilities, potentially impacting its U.S. fab expansion plans.

Currently, the island operates under a more lenient “N-1” rule, allowing exports at least one generation behind. The new rule would significantly tighten this, limiting exports to technologies that are 2 to 4 years older than the most advanced nodes developed in Taiwan. For example, if TSMC achieves a 1.2nm or 1.4nm process in Taiwan, only 1.6nm or older technologies could be exported.

Impact on U.S. Fabs and Future Compliance
TSMC’s Fab 21 in Arizona currently produces 4nm/5nm (N4/N5) chips. With Taiwan already mass-producing 3nm (N3) and preparing for 2nm (N2) production, the Arizona Phase 1 plant currently complies with the proposed N-2 rule. However, a key test will come around 2027. If the Arizona Phase 2 plant begins producing 3nm chips, it might violate the rule as that node would be only one generation behind the expected leading A16 (1.6nm) process in Taiwan. The final assessment may hinge on whether A16 is classified as a distinct new generation.

Officials emphasize that TSMC’s core R&D remains firmly rooted in Taiwan, with a concentration of engineers and scientists ensuring the local technological foundation. All overseas investments above a certain threshold will undergo strict review by the Taiwanese investment commission to control technology and capacity outflow.

ICgoodFind's Insight
The proposed N-2 rule represents a strategic tightening to maintain Taiwan's critical semiconductor technology advantage. Its implementation would fundamentally reshape the timeline and capability of TSMC's overseas advanced manufacturing, creating a new variable in the global chip supply chain and technology sovereignty landscape.