By AFP and Focus | 2026-01-05

TAIPEI -- Taiwanese tech titan TSMC has started mass producing its cutting-edge 2-nanometer (2nm) semiconductor chips, the company said in a statement in December.

TSMC is the world's largest contract maker of chips, used in everything from smartphones to missiles, and counts Nvidia and Apple among its clients.

"TSMC's 2nm (N2) technology has started volume production in 4Q25 [fourth quarter of 2025] as planned," TSMC said in an undated statement on its website.

The chips will be the "most advanced technology in the semiconductor industry in terms of both density and energy efficiency," the company said.

"N2 technology, with leading nanosheet transistor structure, will deliver full-node performance and power benefits to address the increasing need for energy-efficient computing."

Advanced 2nm chips perform better and are more energy efficient than previous generations, and are structured differently to house even more of the key components known as transistors.

The technology will help speed up laptops, reduce data centers' carbon footprint and allow self-driving cars to spot objects quicker, according to US computing giant IBM.

AI engine

For artificial intelligence (AI), "this benefits both consumer devices -- enabling faster, more capable on-device AI -- and data center AI chips, which can run large models more efficiently," said Jan Frederik Slijkerman, senior sector strategist at Dutch bank ING.

The chips will be produced at TSMC's "Fab 20" facility in Hsinchu and at "Fab 22" in Kaohsiung.

Producing 2nm chips, the most cutting-edge in the industry, is "extremely hard and expensive," requiring "advanced lithography machines, deep knowledge of the production process and huge investments," Slijkerman said.

Only a few companies are capable of making them. Alongside TSMC, South Korea's Samsung and US firm Intel are also developing 2nm chips.

But TSMC remains in the lead, with the other two "still in the stage of improving yield" and lacking large-scale customers, said TrendForce analyst Joanne Chiao.

More than half of the world's semiconductors, and nearly all of the most advanced ones used to power AI technology, are made in Taiwan.

TSMC has been a major beneficiary of the global surge in AI investment, as firms including Nvidia and Apple pour billions of dollars into chips, servers and data centers.

AI-related spending is soaring worldwide and is expected to reach approximately $1.5 trillion by 2025, according to US research firm Gartner, rising to more than $2 trillion in 2026, nearly 2% of global GDP.

Strategic shield

Taiwan's dominance of the chip industry has long been seen as a "silicon shield" protecting it from an invasion or blockade by China, which claims the island as its territory. It also serves as a critical incentive for the United States to defend the island.

TSMC's path to mass 2nm production has not always been smooth.

Taiwanese prosecutors charged three suspects in August with stealing trade secrets related to 2nm chips to help Tokyo Electron, a Japanese company that makes equipment for TSMC.

"This case involves critical national core technologies vital to Taiwan's industrial lifeline," the high prosecutors' office said at the time.

Geopolitical factors and trade wars are also at play.

Nikkei Asia reported last summer that TSMC will not use Chinese chipmaking equipment in its 2nm production lines to avoid disruption from potential US restrictions.

TSMC says it plans to speed up production of 2nm chips in the United States, currently targeted for "the end of the decade."

At the same time, the threat of a Chinese attack has fueled concerns about potential disruptions to global supply chains and has increased pressure to expand chip production beyond Taiwan.

Chinese fighter jets and warships encircled Taiwan during live-fire drills last week aimed at simulating a blockade of the democratic island's key ports and assaults on maritime targets.

Taipei condemned the two-day exercises as "highly provocative and reckless" and said the maneuvers failed to impose a blockade.

TSMC has invested in chip fabrication facilities in the United States, Japan and Germany to meet surging global demand.

But Taiwanese Deputy Foreign Minister Francois Chih-chung Wu said in an interview with AFP in December that the island plans to keep making the "most advanced" chips at home and remain "indispensable" to the global semiconductor industry.