Taiwan to Apply New Security Rules to TSMC's U.S. Plants to Protect Core Technologies

Taiwan to Tighten Security Regulations on TSMC's U.S. Investments
"One Generation Behind" Technology Rule Considered for Overseas Plants

AFP Yonhap News

Taiwanese authorities are set to apply new security regulations to TSMC's investments in the United States, according to reports by Taiwanese media including United Daily News on April 28, citing sources. This move is interpreted as an effort to ensure that TSMC's U.S. plants operate using "one generation behind" technology.

According to the sources, the Ministry of Economic Affairs of Taiwan recently announced plans to revise subordinate regulations under the "Industrial Innovation Act," which was recently passed by the Legislative Yuan to protect Taiwan's core technologies and maintain industrial competitiveness.

The source explained that, under the amended Industrial Innovation Act, the subordinate regulations will be revised to require prior approval for future investments not only exceeding a certain amount, but also involving specific countries or regions, specific industries, or technologies. If any of these conditions are met, prior application will be mandatory.

The source added that the Ministry of Economic Affairs is considering raising the investment threshold from 1.5 billion New Taiwan dollars (approximately 66.2 billion won) to 3 billion New Taiwan dollars (approximately 132.5 billion won). This is seen as being related to the Central Bank of Taiwan's recent decision to increase the annual foreign exchange settlement limit for corporations from 50 million U.S. dollars (approximately 71.9 billion won) to 100 million U.S. dollars (approximately 143.9 billion won).

Another source stated that there is no explicit regulation in Taiwanese law requiring TSMC to apply "one generation behind" technology at its U.S. plants. However, the recently passed Industrial Innovation Act stipulates that overseas investments may be denied if they "affect national security" or "have an adverse impact on national economic development."

Therefore, it was pointed out that the authorities may invoke this provision to require TSMC to apply the so-called "N-1" rule to its U.S. investments, meaning that advanced process nodes (N) are to be operated in Taiwan, while one generation older process nodes (N-1) are to be operated at overseas plants.