The N-2 Rule of Taiwan is Aimed at Protecting Leadership in Semiconductors
Taiwanese officials have clarified the conditions under which investments of TSMC in the United States pertain to the protection of the nation's core semiconductor technologies. At the most obvious level, this would be the "N-2" rule limiting the exportation of technologies to those that are two generations behind what is presently being developed in Taiwan.
N-2 Export Control Explained
Lin Fa-cheng, Vice Chairman of the National Science Council, made this point while presenting a report to the legislative Yuan's Education and Culture Committee. The N-2 principle makes sure that the most advanced technologies of Taiwan stay with Taiwan.
Basically, export is allowed for only two generation older technologies than the leading-edge process developed in Taiwan.
Example: If TSMC develops 1.4 nm process technology in Taiwan, 1.6 nm technology becomes eligible for export.
Lin Fa-cheng remarked that the bulk of TSMC's R&D personnel are in Taiwan and that TSMC follows these government rules.
A Regulatory Structure with Many Layers
The N-2 rule is a component of a larger protection scheme for the country's technology assets. Multiple other arrangements exist:
- National Core Technology List: The government has an annual review and update of the list of core and critical technologies.
- Personnel Regulation: Any person working on projects deemed critical is already under government regulation.
- Export Restrictions: The Ministry of Economic Affairs places restrictions on the exporting of certain products and technologies as per the national list. Presently, semiconductor processes below 14 nm, including equipment and materials related to them, appear on the list of key technologies.
Backstopping by Investment Overseas
Large shares of investment overseas by firms such as TSMC are also governed by a review from the government. The investment activities toward the United States will, Tsou Yu-hsin, Deputy Director-General of the Development Research Agency, say, be put under a regulatory framework.
- Investment Review Committee: An investment must, beyond a certain monetary threshold, be subjected to a review by the Investment Review Committee of the Ministry of Economic Affairs.
- Review Criteria: The committee reviews the effect of the investment on the domestic industry and other issues regarding national security prior to an approval.
