TSMC has poured enormous resources into building out a stronger U.S. semiconductor footprint, aiming to create a more secure supply chain and reduce the risk of disruptions tied to global politics. But despite the headline-making investments and big expectations around American-made chips, Taiwan’s rules and priorities could prevent the United States from ever getting TSMC’s most advanced manufacturing nodes at the same time as Taiwan.
At the center of the issue is Taiwan’s long-standing concern that moving cutting-edge chip production overseas could weaken its leadership in semiconductors. Taiwanese lawmakers and industry experts have repeatedly raised alarms that large-scale expansion abroad could accelerate technology transfer and dilute Taiwan’s strategic advantage. Those worries have translated into policy pressure, including a commitment often described as “N-2.”
In simple terms, “N-2” means TSMC’s offshore fabs are expected to stay roughly two process generations behind what the company is producing at home in Taiwan. Taiwan’s deputy science minister, Fa-cheng Lin, reaffirmed this stance when questioned about offshore manufacturing policy. The idea is straightforward: if the most advanced nodes are being developed in Taiwan—such as future 1.2nm or 1.4nm-class technologies—then overseas sites would be limited to producing a less advanced generation, such as 1.6nm-class technology, rather than the absolute leading edge. A key reason this policy is feasible is that most of TSMC’s research and development workforce remains in Taiwan, and the company is expected to comply with local regulations governing where the newest technologies can be produced.
This presents a major challenge for U.S. ambitions. Washington and major U.S. chip designers have pushed hard for more advanced manufacturing on American soil to protect access to high-performance processors for AI, data centers, smartphones, and defense-related systems—especially during periods of geopolitical uncertainty. Alongside political pressure (including tariff-related leverage), demand from U.S. customers has helped fuel TSMC’s interest in scaling its American plans dramatically, with talk of investments reaching as high as $300 billion.
Even so, the practical reality is that the “best first” manufacturing looks set to remain in Taiwan.
TSMC’s Arizona expansion is expected to include 3nm production lines, with high-volume manufacturing targeted around 2027. That’s a significant step for U.S.-based chip production, but it still underscores the gap created by the N-2 approach. By the time 3nm ramps in Arizona, Taiwan is expected to be moving forward aggressively—potentially shifting toward A16 (1.6nm-class) technology after a successful ramp of N2 (2nm). If Taiwan stays ahead at each step, the U.S. remains in a position where it can gain advanced capacity, but not the very latest node at the same time as Taiwan.
For American policymakers and the domestic chip industry, the implication is clear: if the goal is true leading-edge independence, the U.S. can’t rely solely on overseas manufacturing champions to bring the newest process technology at parity. Building a resilient semiconductor supply chain would require deeper domestic investment across the full stack—advanced R&D, cutting-edge fab tools, packaging capability, and a large pipeline of specialized engineering talent.
There’s also an interesting competitive angle. Analyst Dan Nystedt suggests that if TSMC remains reluctant (or restricted) from bringing its top-tier nodes to the U.S., it could create an opening for Intel’s foundry business. Because Intel develops and manufactures process technology domestically, shifting supply chain dynamics could benefit Intel Foundry—especially as the company promotes next-generation nodes like 14A. If customers prioritize leading-edge production on U.S. soil and TSMC’s most advanced nodes stay anchored in Taiwan, Intel could find itself in a stronger position to attract strategic manufacturing demand.
That said, it’s still early, and the semiconductor landscape changes quickly. What’s already apparent is that TSMC’s U.S. expansion is real and meaningful—but Taiwan’s policies may ensure that the most advanced chipmaking remains, first and foremost, at home.
