Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, has been at the center of discussions about transferring its most advanced 2nm (N2) semiconductor process technology to overseas fabs. While Taiwanese regulations currently prohibit such transfers, recent comments by Taiwanese officials suggest that after N2 enters mass production in 2025, discussions about sharing this leading-edge technology with democratic allies could take place. This shift comes amidst geopolitical pressures, including comments by former U.S. President Donald Trump regarding the Biden administration’s CHIPS Act.
Taiwanese law prevents TSMC from transferring its most advanced semiconductor technology to foreign countries. This restriction is rooted in Taiwan’s strategy to maintain its technological edge and secure its role in the global semiconductor supply chain. As of now, TSMC plans to deploy its 2nm process exclusively within Taiwan, where the technology will enter mass production by late 2025.
J.W. Kuo, Taiwan’s Minister of Economic Affairs, reiterated that TSMC cannot legally export its cutting-edge nodes, including N2, due to these regulations. Instead, the company’s U.S.-based fabs will focus on slightly older nodes, such as 4nm (N4) and 5nm (N5), starting in 2025, with 3nm-class technology (N3) scheduled for deployment in 2028. The introduction of 2nm production at TSMC’s Arizona facility is not expected until the end of the decade.
Pressures to Accelerate Technology Transfer
Despite TSMC’s cautious roadmap, geopolitical and economic pressures are mounting. Former U.S. President Donald Trump criticized the Biden administration’s CHIPS and Science Act during his campaign, arguing that import tariffs on foreign-made chips would be more effective than subsidies in encouraging semiconductor production in the U.S. Such tariffs could force companies like TSMC to expedite the transfer of advanced nodes, including 2nm, to their U.S.-based facilities.
However, this scenario faces logistical challenges. Semiconductor manufacturing is heavily reliant on specialized equipment, and the global shortage of fabrication tools could make it difficult for TSMC to equip its Arizona fabs ahead of schedule.
The Role of R&D and Manufacturing Synergy
One of the primary reasons why TSMC’s leading-edge nodes remain in Taiwan is the company’s tightly integrated R&D and manufacturing ecosystem. TSMC’s research and development teams are based in Taiwan, where they collaborate closely with manufacturing teams to optimize process technologies for mass production.
Analyst Dan Nystedt highlights that developing and ramping up advanced nodes like N2 is significantly easier when these processes are confined to a single location. The complexity of transferring such technology to another facility, particularly in a different country, introduces challenges in coordination, quality control, and efficiency. As a result, simultaneous mass production of TSMC’s cutting-edge nodes in Taiwan and overseas locations is unlikely in the near future.
The CHIPS Act and Its Implications
The CHIPS Act, enacted under the Biden administration, aims to bolster domestic semiconductor production through grants, tax credits, and loan guarantees. TSMC’s Arizona Fab 21, partially funded under this act, is part of this broader effort to reduce reliance on foreign chip manufacturing.
The facility’s roadmap includes three phases:
- Phase 1 (2025): Production of 4nm and 5nm chips.
- Phase 2 (2028): Deployment of 3nm technology.
- Phase 3 (2030): Introduction of 2nm-class chips.
While the CHIPS Act incentivizes U.S.-based production, Trump’s suggested import tariffs could impose additional pressure, potentially disrupting TSMC’s carefully planned timelines.
The Strategic Importance of High-Tech Nodes
TSMC’s advanced nodes are crucial not only for technological progress but also for national security. As the global demand for semiconductors grows, countries are increasingly viewing chip production as a strategic asset. Taiwan’s position as a global semiconductor leader gives it significant leverage, but it also faces risks from geopolitical tensions, particularly with China.
To strengthen partnerships with democratic nations, Taiwan has hinted at the possibility of transferring 2nm technology to allies after 2025. However, such decisions will likely depend on Taiwan’s assessment of national security and economic priorities.
The global semiconductor industry faces several challenges that complicate the deployment of advanced technologies overseas:
- Tool Shortages: The production of high-tech chips requires specialized equipment, which is in short supply globally.
- Skilled Labor: Operating advanced fabs requires a highly skilled workforce, which is not readily available in many regions.
- Supply Chain Coordination: Ensuring the availability of materials, components, and equipment is critical to the success of overseas fabs.
These challenges mean that even with strong political and economic incentives, replicating Taiwan’s semiconductor success elsewhere will take time and substantial effort.
TSMC’s 2nm technology represents a pinnacle of semiconductor innovation, but its transfer to overseas fabs is fraught with legal, logistical, and geopolitical challenges. While Taiwan has indicated a willingness to discuss technology transfers with friendly nations after 2025, the complexity of such an endeavor makes it unlikely in the short term.
As global demand for advanced semiconductors continues to rise, Taiwan remains committed to maintaining its leadership in the industry. However, with increasing pressure from geopolitical forces and international partners, the coming years will test TSMC’s ability to balance its strategic priorities while navigating a rapidly evolving global landscape.
