There are companies that stress test engines for OEM's. One of these companies has been testing the N20 apparently. The advice given is not to go beyond Stage 2 on the N20 which means a slightly more aggressive tune on the factory turbocharger. Why? The N20 head apparently cracks at around 331 pound-feet of torque. That is not exactly a whole lot of torque in the turbo tuning game especially considering the motor puts out an underrated 258 pound-feet from the factory.
Apparently the engine is just running very hot and multiple heat cycles are creating problems. BMW behind the scenes is supposedly trying to correct the issue. For whatever reason BMW seems to have a reputation for problems with new motors. S54 bearings, S65 bearings, and the next BMW new motor issue looks to be the N20 head cracking.
The story is that one of the lead designers and engineers for the N20 was flown out to the USA to inspect the findings for himself. It is doubtful BMW would do that unless there was something of substance to this. This same company also apparently tested other BMW motors including turbo motors such as the N54 and N55 when they were new and they did not run into these head issues.
So what is going to happen? Well, right now it is not recommended for N20 owners to push their motors too far which they can't anyway as there are not aftermarket turbo options out just yet. BMW will likely resolve the problem with a new head which will mean for those with the N20 there will either be a recall or there will be a BMW part number option to get the new head. We will have to wait and see what happens but N20 owners should be aware of the potential issue especially if intending to tune as BMW is unlikely to say anything until they have to.