Construction commences on TSMC's U.S. factory equipped for 1.6nm and 2nm chip production: Fab 21 expansion phase 3
TSMC, the world's largest semiconductor manufacturer, is set to significantly advance its ability to transfer cutting-edge production technologies, particularly the transition to 2nm process nodes, with its investment in Fab 21 Phase 3 near Phoenix, Arizona. This move is driven by U.S. government incentives under the CHIPS Act and aims to boost semiconductor manufacturing capacity domestically and reduce reliance on Taiwan.
The $165 billion investment in American production facilities, announced in March, will see Fab 21 Phase 3 and Phase 4 implement N2 (2nm) and A16 process technologies with high-volume production targeted later this decade in Arizona. Fab 21 module 3 and 4 will produce chips on TSMC's 2nm-class process technologies.
However, a new Taiwanese law restricts TSMC from exporting its most advanced fabrication process to overseas facilities. This creates a complex dynamic influencing how technology transfer occurs. TSMC will have the legal right to begin making chips on its N2P, A16, and derivative nodes in the U.S. by late 2028, but the most advanced technology nodes (like 2nm) are still carefully managed in terms of transfer.
The CHIPS and Science Act provides substantial subsidies and incentives but aligns with export controls and technological safeguards designed to prevent the outflow of sensitive intellectual property, especially to China. The completion of Fab 21 phase 3 is expected between 2028 and 2030.
In practice, this means that TSMC’s investment in Fab 21 Phase 3 allows for deploying its most advanced manufacturing capabilities within the U.S., legally enabled and incentivized by the CHIPS Act, while respecting Taiwanese regulations on technology transfer. TSMC balances resource allocation to accelerate U.S. fabs without derailing Japanese or European projects, but delays in other locations suggest prioritization aligned with geopolitical risks and tariff threats.
Technically, Fab 21 Phase 3 will use N2 process technology, TSMC’s first to introduce Gate-All-Around (GAA) transistor designs (moving beyond FinFET used in 3nm), representing a major leap in power efficiency and performance. Fab 21 module 5 and 6 will use even more advanced processes, including A14 (1.4nm-class) and derivatives.
The U.S. government is legally bound to provide CHIPS Act funding to companies such as TSMC, Intel, GlobalFoundries, Texas Instruments, Samsung, and others through the end of 2026. Companies may need to deepen their U.S. presence to access federal semiconductor funding under the CHIPS and Science Act.
In summary, TSMC’s Fab 21 Phase 3 investment enhances its ability to transfer advanced production technologies like the 2nm node to the U.S., enabled by the CHIPS and Science Act incentives but carefully controlled under Taiwanese export laws to protect IP and strategic technology. This strategic balance supports strengthening U.S. semiconductor supply chains while maintaining Taiwan’s technological sovereignty.
[1] Tom's Hardware Newsletter [2] TSMC Official Website [3] CHIPS Act Official Website
Data-and-cloud-computing companies, with the increasing reliance on semiconductors, may benefit from TSMC's investment in Fab 21 Phase 3, as it will implement advanced N2 process technology, offering improvements in power efficiency and performance. This technology transition is facilitated by the CHIPS Act and strategic technology transfer regulations.
The strategic decisions made by TSMC regarding the allocation of resources to Fab 21 Phase 3 underscore the importance of technology in today's connected world, where data-and-cloud-computing is increasingly reliant on advanced semiconductor manufacturing technology.
