Scrutiny

TSMC will no longer use Chinese-made equipment in its 2nm chip production lines, according to reports from both Digitimes and Nikkei Asia. The change comes as U.S. lawmakers advance the Chip EQUIP Act, a proposal that would prohibit companies receiving American subsidies from buying tools from “foreign entities of concern,” including Chinese firms such as AMEC and Mattson Technology.

Nikkei Asia writes that while Chinese equipment was present in TSMC’s earlier advanced fabs, the company has chosen to qualify only Japanese, American, and European tools as it ramps up 2nm production in Hsinchu and Kaohsiung, with Arizona to follow. That ensures its most advanced fabs are insulated from potential U.S. restrictions at a time when federal incentives are a crucial factor in global expansion.

2nm a major transition for TSMC

The upcoming 2nm (N2) process marks a critical moment for the world’s largest contract chipmaker. It’ll be the first production technology by TSMC to feature gate-all-around (GAA) transistors, the chip industry’s first significant structural shift since FinFETs, and is expected to enter production within the next few months.

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According to TSMC, 2nm will bring “full node improvements,” including a 10% to 15% boost in performance and a 25% to 30% reduction in power draw. With so much riding on the transition, TSMC’s choice of equipment suppliers has already had a huge impact on factors like yield, but now the company has to balance this with safeguarding U.S. market access and reassuring customers like Apple and Nvidia that production will not be disrupted by politics.

But while Nikkei Asia highlights the elimination of Chinese equipment, Digitimes paints a picture of broader supplier unease. The outlet reports that TSMC has begun auditing Taiwanese equipment and materials providers, focusing on profit margins and exposure to China.

Vendors with gross margins well above TSMC’s own ~58% benchmark, or with heavy reliance on Chinese sales, may be excluded from its 2026 approved vendor list. According to Digitimes, some companies have already lost orders. That raises the possibility that TSMC is using the geopolitical moment to both align with U.S. policy and tighten control over supplier costs and risk profiles.

Supply chain realignment

Taken together, the two reports indicate a supply chain realignment is occurring on two fronts. On the one hand, TSMC is cutting ties with Chinese tools to pre-empt Washington’s restrictions and maintain eligibility for subsidies. On the other hand, it appears to be using the same momentum to reshape its local supply chain, favoring vendors who align with its financial and geopolitical strategy.

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This signals that TSMC’s decoupling from suppliers isn’t entirely about politics but also a way for the company to consolidate its leverage over suppliers. By enforcing margin discipline and reducing exposure to Chinese firms, TSMC helps its partners remain competitive without jeopardizing its own regulatory position. The risk is that some Taiwanese firms could pivot further toward China, deepening the divide that TSMC is trying to manage.

Ultimately, the race to 2nm is being shaped as much by politics and economics as by transistor physics. We’ll still get faster, more efficient chips on schedule (knock on wood), but the supply chain is narrowing to a smaller pool of politically acceptable players.

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