Taiwan Says TSMC Can't Make 2nm Chips Abroad, For Now

Taiwan’s economy minister said top chipmaker TSMC is not allowed to make 2 nanometre (nm) chips outside of the island for now, raising concerns about the firm’s chipmaking ambitions in the United States.

“Since Taiwan has related regulations to protect its own technologies, TSMC cannot produce 2-nanometre chips overseas currently,” Minister of Economic Affairs JW Kuo said at a legislative meeting last week.

He made the comment in reference to concerns that TSMC may need to start producing 2nm chips at its plant in Arizona, US earlier than planned in light of Donald Trump’s re-election as the president of the United States.

Also on AF: TSMC to Cut Off All Chinese AI Clients From Its Advanced Chips

The comments — reported by newspaper Taipei Times — refer to Taiwanese law under which the island’s chipmakers can only make chips overseas that are one generation less advanced than those in production at home.

The law would limit TSMC’s ability to produce 2nm chips in the US at a time when the incoming Trump Administration could put increasing production-related demands on the island, and the chipmaker.

For TSMC to produce 2nm chips in the US, it will need to roll out production of its top-of-the-line 1.6nm semiconductors at home. TSMC is planning to begin producing the chip — also referred to as ‘A16’ — by the second half of 2026.

Meanwhile, TSMC is building three fabrication facilities in the US, with a planned investment of $65 billion in Arizona state.

Its first fab in the state will begin producing 4nm chips starting December this year. The second and third fabs are slated to produce 3nm and 2nm chips, with production starting from 2028 and 2030, respectively.

“Although TSMC plans to make 2-nanometre chips [abroad] in the future, its core technology will stay in Taiwan,” economy minister Kuo said.

‘Testy’ US ties under Trump

The remarks from Kuo come at a time when Taiwan is preparing to traverse a tricky relationship with Trump.

Unlike his friendlier stance towards Taiwan in his first term, Trump made a series of remarks targeting the island during his campaign trail this year.

Speaking on a podcast, at one point, Trump said Taiwan needs to start paying the US for its protection. “The mob makes you pay money, right?” he said.

That was after he accused Taiwan of stealing American chip business.

In the same podcast, Trump also sharply criticised the outgoing Joe Biden government’s CHIPS and Science Act and its subsidies for chipmakers like TSMC.

“When I see us paying a lot of money to have people build chips, that’s not the way,” Trump said. “You didn’t have to put up 10 cents. You could have done it with a series of tariffs. In other words, you tariff it so high that they will come and build their chip companies for nothing.”

TSMC is on track to receive grants worth $6.6 billion and loans of up to $5 billion from the US for the fabs under the CHIPS and Science Act. Last week, the Biden Administration sped up the process to finalise that funding, amid concern that Trump could repeal the grants when he officially becomes president.

Trump’s remarks have also meant that Taiwan “appears to be preparing for a more delicate, possibly testy, relationship with Mr Trump,” The New York Times reported on Sunday.

Production pressure

Taiwan is expecting Trump to ask the island to buy more American arms, while also requiring that chipmakers like TSMC increase production in the US.

The island also expects the US to continue to “impose technology restrictions to defend its own interests.”

“But Taiwan will basically go along with these restrictions, and we believe that we will have opportunities to benefit from them,” Liu Chin-ching, the minister in charge of Taiwan’s National Development Council, told lawmakers last week, according to NYT.

That stance became evident when TSMC notified all its Chinese artificial intelligence (AI) clients it would stop producing chips at 7nm or below for them starting November 11.

The decision resulted from a US order asking TSMC to halt shipments of advanced AI chips to Chinese customers.

Vishakha Saxena

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]