Taiwan Rejects U.S. Push to Shift Chip Production, Says it’s Impossible

In Focus

• The U.S. wants to onshore 40% of cutting-edge chip production capacity
• Taiwan says its chip production ecosystem is densely integrated
• The Asian country will not shift its science parks, but is ready to share expertise

Taiwan is pushing back on attempts to relocate a large percentage of its chip production to the U.S. According to Reuters, Taiwan says shifting 40% of its chip capacity to the U.S. would be impossible. Taiwan’s Vice Premier Cheng Li-chiun, who leads the country’s trade negotiation, said the island’s position had been communicated to the U.S.

Taiwan Says Tight Chip Ecosystem Hinders Shift

Taiwan’s chip ecosystem includes a densely integrated network of skilled labor, suppliers, and research institutions developed over decades. According to Cheng, such an ecosystem cannot simply be transferred.

While rejecting the proposal to shift 40% of Taiwan’s chip production capacity to the U.S., the Vice Premier added that the semiconductor industry is committed to expanding local investment as its global footprint grows. She further said Taiwan would only pursue overseas expansion only if such a move maintains the island as the main operations base.

“Our overall capacity in Taiwan will only continue to grow. But we can expand our presence in the United States. Our international expansion is based on the premise that we remain firmly rooted in Taiwan and continue to expand investment at home,” Cheng stated as cited by Reuters.

The standoff between the U.S. and Taiwan, which is home to some of the best chipmaking companies, exposes the geopolitical dynamics that are reshaping chip supply globally. Although the U.S. can use tariffs and subsidies to incentivize local chip production, Taiwan’s dominance in the chip industry rests on an established ecosystem that cannot be replicated fast.

U.S. Quest to Onshore Chip Production

Taiwan’s U.S. chip manufacturing conflict emerges amid renewed calls to reduce chip production near China. Last week, Washington said the U.S. needed to onshore more chip capacity.

“You can’t have all semiconductor manufacturing 80 miles from China. That’s just illogical. We need to bring it back,” U.S. Secretary of Commerce Howard Lutnick said as reported by Reuters.

Previously, Secretary Lutnick had said the Trump administration plans to onshore 40% of cutting-edge chip production capacity. Washington has said that failure to realize large-scale relocation could lead to higher chip import tariffs for Taiwan. The country has previously turned down a similar proposal, including the idea to split chip production.

Earlier this year, the U.S. and Taiwan agreed to lower duties on Taiwanese exports from 20% to 15%. The trade agreement included a commitment by Taiwan to increase investment in the U.S.

Focus on Maintaining Independence

In a bid to maintain its chip industry independence, Taiwan said it will not shift its science parks to the U.S. However, the country is willing to share expertise in setting up industry clusters to enable the U.S. to build its chip ecosystem.

TSMC is expanding its factory in the U.S. after investing over $100 billion to fabricate plants in Arizona. With competition over advanced semiconductors intensifying, the debate between the U.S. and Taiwan shows how national strategy, economic security, and industrial reality continue to collide.