Taiwan has firmly rejected a United States proposal to relocate 40% of its semiconductor supply chain to American soil, with Taipei’s chief trade negotiator declaring the plan impossible on Sunday.
Vice Premier Cheng Li-chiun, speaking during a televised interview on Chinese Television System, told US officials that Taiwan’s semiconductor ecosystem, developed over decades, cannot simply be moved. She emphasised that Taiwan’s international expansion, including investments in the United States, depends on the industry remaining rooted in Taiwan while continuing domestic growth.
The comments directly challenge onshoring targets outlined by US Commerce Secretary Howard Lutnick in a January interview following the latest US-Taiwan trade agreement. Lutnick stated he wanted 40% of Taiwan’s entire chip supply chain to shift to the United States within President Donald Trump’s current term.
Under the recent trade deal, the Taiwanese government pledged 250 billion US dollars in direct investments by its technology companies, alongside an additional 250 billion US dollars in credit to help expand production capacity in the United States. Washington lowered tariffs on most goods from Taiwan to 15% from 20%, waived tariffs on generic drugs and ingredients, aircraft components and natural resources unavailable domestically, and promised higher quotas for tariff-free exports of Taiwanese chips.
Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading contract chipmaker, has committed more than 65 billion US dollars to US manufacturing in recent years and plans to expand that to 165 billion US dollars as it produces chips for American clients Apple and Nvidia. The investments have also leveraged grants under the US CHIPS and Science Act.
Lutnick has said Washington wants hundreds of smaller companies across the chip supply chain to move to the United States. He stated in January that the administration plans to build giant semiconductor industrial parks in America, describing the initiative as a 500 billion US dollar down payment on bringing semiconductors home. Taiwan-based chip companies that do not build in the United States are likely to face a 100% tariff that Trump has threatened against the sector, according to Lutnick.
Semiconductor analysts broadly agree with Cheng’s assessment, citing the challenges of relocating such an advanced supply chain. Analysts and industry officials point to Taiwan’s deeply integrated ecosystem, US labor shortages and elevated costs as key obstacles.
Geopolitical analysts have also highlighted the Silicon Shield theory, which holds that the island’s pivotal role in global chip supply makes safeguarding its autonomy a US strategic imperative and could deter potential Chinese aggression. Beijing claims sovereignty over the democratically governed island.
Taiwanese authorities have already implemented a policy requiring TSMC’s overseas plants to operate using technologies at least two generations behind the most advanced ones deployed in Taiwan, often referred to as the N-2 rule.
Taiwan produces more than 60% of global semiconductors and roughly 90% of the world’s most advanced chips. Cheng reiterated that Taiwan’s science parks would not be relocated to the United States, though Taiwan is willing to share its experience in building semiconductor industry clusters to help the United States develop a similar environment.
