TSMC phases out Chinese equipment from 2-nm plants amid US policy risks

TSMC's move is linked to the proposed US Chip EQUIP Act; aimed at securing subsidies, diversifying supply chains

Taiwan Semiconductor Manufacturing Company (TSMC) will stop using Chinese-made machinery in its most advanced 2-nanometre (nm) chip plants, a move aimed at reducing regulatory risks and ensuring continued access to US subsidies, Nikkei Asia reported on Monday.

 

TSMC’s 2 nm lines, considered the world’s most sophisticated, will begin mass production later this year in Hsinchu and Kaohsiung. The company is also building a facility in Arizona, US, which is expected to play a growing role in advanced chip output as expansion progresses.

 

In previous production generations, including its 3 nm technology, TSMC used equipment from Chinese suppliers such as TSMC Inc. (AMEC) and Mattson Technology—the latter acquired by Beijing E-Town Semiconductor Technology in 2016.

 

 

The shift away from these sources comes as the 2 nm process ramps up, making it easier to requalify suppliers without affecting established lines.

 

The US Chip EQUIP Act

The move seems to be tied to the proposed Chip Equipment and US Protection (EQUIP) Act, introduced in 2024. The bill seeks to prevent companies receiving federal funding or tax incentives from purchasing tools made by “foreign entities of concern,” a phrase widely interpreted to include Chinese manufacturers.

 

The bill, however, remains in committee review in Congress and has not yet been enacted.

 

TSMC is also reviewing its procurement of materials and chemicals. The goal is to reduce reliance on Chinese inputs in Taiwan and the US, while continuing to source locally for its facilities in China in line with Beijing’s domestic industrial policies.

 

Trade backdrop: US-China tariff war and truce

The decision comes as US-China trade relations remain volatile. Tariffs between the two sides peaked this year at 145 per cent on Chinese goods entering the US and 125 per cent on US exports to China, before both governments agreed to a 90-day truce in May 2025. Under the deal, US tariffs dropped to 30 per cent and China’s to 10 per cent. The arrangement was extended to November 10, 2025.

 

TSMC reduces China reliance

TSMC has also begun reviewing its procurement of chemicals and raw materials, intending to reduce reliance on Chinese inputs for operations in Taiwan and the US, while continuing to engage local suppliers for its mainland China fabs to align with Beijing’s domestic sourcing priorities.

 

By excluding Chinese equipment, TSMC is shielding its eligibility for US subsidies, diversifying its supply chain, and positioning itself against an uncertain geopolitical and regulatory landscape.

 

Equipment manufacturers

While Dutch firm ASML still dominates in photolithography, Chinese equipment maker Naura has risen to become the sixth-largest player globally, following ASML, Applied Materials, Tokyo Electron, Lam Research and KLA.

 

According to Nikkei Asia, TSMC Chairman and CEO CC Wei said the company’s Arizona buildout is accelerating, with the US projected to account for about 30 per cent of its 2 nm and smaller chip output once expansion plans are realised.