Taiwan has firmly rejected a proposal from Washington that would require 40% of the island’s semiconductor supply chain to move to the United States, calling the target unrealistic and unworkable. In a recent television interview, Vice Premier and chief trade negotiator Cheng Li-chiun said Taiwan had clearly conveyed its position to U.S. officials, describing the relocation goal as “Impossible”: Taiwan rejects Washington’s target to shift 40% of chip production abroad.
Cheng emphasized that Taiwan’s semiconductor ecosystem has been carefully built over decades and cannot simply be uprooted and recreated overseas. The industry, she explained, depends on a tightly woven network of manufacturers, suppliers, engineers, and research hubs that are deeply embedded within the island’s economy.
Industry Expansion Must Remain Rooted in Taiwan
While Taiwan continues to expand internationally — including significant investments in the United States — Cheng stressed that such growth is based on keeping the core of the industry at home. Overseas investments are meant to complement, not replace, domestic production capacity.
Her remarks directly counter earlier comments from U.S. Commerce Secretary Howard Lutnick. In a January interview, Lutnick said he wanted 40% of Taiwan’s semiconductor supply chain relocated to the U.S. during President Donald Trump’s current term, following the latest trade agreement between the two sides.
Under that agreement, Taiwan pledged $250 billion in direct investments from its technology firms, along with another $250 billion in financing support to help expand production capacity in the United States. In return, Washington reduced tariffs on most Taiwanese goods to 15% from 20%, eliminated duties on certain pharmaceuticals, aircraft parts and unavailable natural resources, and expanded tariff-free export quotas for Taiwanese chips.
TSMC’s Growing U.S. Footprint
Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker and a critical supplier of advanced semiconductors, has already aligned itself more closely with U.S. policy priorities. The company has committed more than $65 billion to American manufacturing projects and plans to increase that investment to $165 billion. Its U.S. facilities are set to produce chips for major American clients such as Apple and Nvidia, with support from grants under the CHIPS and Science Act.
However, Lutnick has indicated that Washington’s ambitions extend beyond TSMC. The U.S. government wants hundreds of smaller suppliers within the semiconductor value chain to establish operations on American soil. He has also warned that companies failing to build in the U.S. could face tariffs as high as 100%, a measure previously threatened by Trump.
Analysts Question Feasibility of Large-Scale Relocation
Despite U.S. enthusiasm for reshoring chip manufacturing, many semiconductor experts agree with Taiwan’s position. Recreating Taiwan’s highly integrated ecosystem abroad would be enormously complex and costly. Industry specialists point to labor shortages in the United States, higher operating expenses, and the intricate coordination required across the supply chain as major obstacles.
Taiwan’s semiconductor dominance has also given rise to the “Silicon Shield” concept — the idea that the island’s central role in global chip production strengthens international incentives to protect it from external threats. Beijing claims sovereignty over Taiwan, while the island operates as a self-governing democracy.
Relocating a substantial portion of chip production overseas could potentially weaken this strategic leverage. In line with that concern, Taiwan has implemented policies to safeguard its technological edge. One such rule requires TSMC’s overseas facilities to use manufacturing technologies at least two generations behind the most advanced processes deployed domestically — a guideline commonly referred to as the “N-2 rule.”
The U.S. Commerce Department has not publicly responded to Cheng’s latest comments. However, Taiwan’s message is clear: while it remains committed to cooperation and investment in the United States, dismantling the backbone of its semiconductor industry is not an option.
