TAIPEI – Taiwan has firmly rejected a U.S. Push to relocate a significant portion of its semiconductor manufacturing capacity to American soil, signaling a potential impasse in Washington’s efforts to bolster domestic chip production and reduce reliance on East Asia. The dispute centers on the scale of relocation, with Taiwanese officials deeming a 40% shift “impossible” and previous proposals for a 50/50 split in production capacity equally unfeasible.
The firm stance from Taipei comes as Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading contract chipmaker, continues to invest heavily in expanding its operations in the United States, notably with a $165 billion project in Arizona. However, these investments are driven by practical growth considerations and customer demand, rather than a wholesale relocation of its core manufacturing base, according to Taiwanese officials.
Vice Premier Cheng Li-chiun, Taiwan’s top tariff negotiator, articulated the island’s position during a broadcast interview on Sunday, stating that the decades-long development of Taiwan’s semiconductor ecosystem cannot simply be moved. “I have made it very clear to the United States that What we have is impossible,” she said, referring to the 40% target proposed by U.S. Officials. She emphasized that Taiwan’s chip industry will continue to expand domestically, even as companies increase their overseas footprint. “Our overall capacity (in Taiwan) will only continue to grow,” she stated, adding, “But we can expand our presence in the United States.”
The U.S. Push for increased domestic chip production is rooted in concerns about the concentration of semiconductor manufacturing near China, a geopolitical flashpoint. U.S. Commerce Secretary Howard Lutnick has argued that bringing semiconductor manufacturing back to American shores is crucial for national security and economic resilience. However, Taiwan’s response underscores the complexities of disentangling a highly integrated global supply chain.
A recent tariff agreement between Taiwan and the U.S., reducing tariffs on Taiwanese exports to 15% from 20%, was presented as a sign of strengthening economic ties. However, the disagreement over chip production capacity highlights underlying tensions. Cheng Li-chiun indicated that Taiwan is willing to share its expertise in building semiconductor clusters to assist the U.S. In developing its own capabilities, but will not relocate its existing science parks.
Analysts suggest that the actual amount of advanced chip production that will ultimately shift to the U.S. Will likely be limited. Economist Lien Hsien-ming recently estimated that less than 15% of TSMC’s most advanced processes will be relocated to the U.S., falling short of Secretary Lutnick’s goal of a 40% shift by 2029. The slow pace of construction in Arizona, with the second TSMC facility not expected to reach mass production until 2027 and a third still under construction, further constrains the potential for a rapid relocation.
The primary driver behind TSMC’s global diversification, according to Chang Chien-yi, president of the Taiwan Institute of Economic Research, is not tariffs or U.S. Pressure, but rather a lack of available land in Taiwan to support further expansion. “The constraints of space in Taiwan – and not tariffs – are what is driving companies like Taiwan Semiconductor to increase foreign investment,” Chang explained, noting that adding advanced manufacturing facilities to already densely populated areas like Taipei is unsustainable.
The situation reflects a broader shift in global semiconductor geopolitics. While the U.S. Seeks to reduce its dependence on Taiwan, Taipei is keen to maintain its dominance in the industry and protect its technological advantage. The island’s rejection of the proposed production shifts suggests a willingness to navigate a delicate balance between cooperation with the U.S. And safeguarding its own strategic interests.
Economists anticipate that the majority of cutting-edge chip production will remain in Taiwan for the foreseeable future, with only a limited portion transferred to the U.S. In the short term, as Arizona facilities take years to fully develop. The long-term implications of this standoff remain to be seen, but it underscores the challenges of reshaping global supply chains in a politically charged environment.
As of , shares of Taiwan Semiconductor (NYSE: TSM) were down slightly in pre-market trading, falling 0.24% to $348.00, according to data from Benzinga Pro.
