TAIPEI (Taiwan News) — An amendment to Article 22 of the Statute for Industrial Innovation passed its third reading, which could complicate plans for TSMC.

The amendment mandates stricter reviews of overseas semiconductor investments to prevent advanced technology leaks, per CNA. It requires companies like TSMC to keep their most cutting-edge chipmaking processes in Taiwan, while foreign fabs must lag by at least one generation per the N-1 rule, per UDN.

The law introduces fines of up to NT$10 million (US$310,000) for unauthorized foreign investments and empowers authorities to block projects threatening national security or economic stability. This comes as TSMC plans to invest NT$3.2 trillion in US facilities, including three wafer fabs and two advanced packaging plants.

The ministry said TSMC’s latest 1.4 nm and 2 nm technologies will remain domestic, while overseas operations like Arizona’s fabs will use older nodes, CNA reported. Officials said the rules apply retroactively, ensuring existing projects comply with the N-1 mandate.

Taiwan’s “silicon shield” policy aims to maintain the country’s semiconductor dominance, which accounts for 60% of global chip production. Analysts note this creates opportunities for US-based Intel but complicates TSMC’s plans to address tariffs through localized production.

While TSMC’s US expansion continues, the company confirmed its R&D in Taiwan will focus on sub-2 nm breakthroughs.