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In response to rising geopolitical tensions and growing concerns over technology security, Chinese Taiwan has announced a significant policy shift to tighten control over exports of its most advanced semiconductor manufacturing technologies and overseas investments in the chip sector. A new regulation—based on an amendment to Article 22 of the Industrial Innovation Act—is set to take effect by the end of 2025 and will implement the so-called "N-1" rule.

Under the new policy, the export of Taiwan's most advanced semiconductor process node will be restricted. Specifically, manufacturers will be prohibited from transferring their latest generation of process technologies abroad. Only slightly older—yet still highly capable—nodes will be permitted for overseas deployment. This policy will directly affect future operations of leading chip manufacturers, particularly TSMC, as it expands production facilities in the United States.

Chinese Taiwan's Premier Cho Jung-tai confirmed that the "N-1" rule will apply to all planned overseas production, including TSMC's U.S.-based facilities. This means cutting-edge nodes such as the N2 (2nm) process, expected to enter volume production by the end of 2024, may be restricted from export once it becomes TSMC's leading technology.

Currently, TSMC's most advanced process is the N3P (3nm) node, but the transition to the N2 node will mark a new milestone in semiconductor performance and efficiency. Beyond 2026, TSMC is projected to run two flagship nodes: N2P for client applications with lower power demands, and A16 (1.6nm) with Super Power Rail technology for high-performance computing (HPC) workloads.

The classification of what constitutes "flagship" technology—and which process nodes will be subject to future restrictions—remains under review. Further complexity is anticipated as TSMC develops successors to the N2P and A16 platforms, including future A14 and A16P nodes. Whether these will be banned from export within a year of launch is still unclear.

Taiwan's Ministry of Economic Affairs stated that the detailed implementation date will be announced within six months after the final regulatory amendments are confirmed. If that timeline holds, the law could be enforced as early as the end of 2025.

In addition to export limitations, the new amendment introduces penalties for unapproved overseas semiconductor investments. Companies making unauthorized investments abroad may face fines ranging from NT$50,000 to NT$1 million (approximately USD 30,830). More severe violations—especially those deemed to pose a risk to national security or economic development—could incur recurring fines of up to NT$10 million (USD 308,286), even after initial approval.

While these fines are relatively minor compared to the scale of major investments—for instance, TSMC's reported plan to boost U.S. plant funding from $65 billion to $165 billion—they underscore Taiwan's intent to safeguard its leadership in semiconductor innovation.