Taiwan has told Washington that proposals to relocate 40% of the island’s semiconductor supply chain to the United States are impossible to execute, according to its top trade negotiator.
Vice Premier Cheng Li-chiun said she made the position clear during discussions with U.S. officials, stressing that Taiwan’s semiconductor ecosystem has been built over decades.
She explained that the deeply integrated nature of the industry means it cannot simply be dismantled and transferred abroad without undermining its efficiency and global competitiveness.
Tensions Follow Recent Trade Agreement
Cheng’s comments directly challenge onshoring ambitions outlined by U.S. Commerce Secretary Howard Lutnick following the latest bilateral trade agreement between Washington and Taipei.
Under the deal, Taiwanese technology firms pledged $250 billion in direct investments, alongside an additional $250 billion in credit to expand production capacity inside the United States.
In exchange, Taiwanese companies were promised higher quotas for tariff-free chip exports, though Lutnick warned that firms failing to build U.S. facilities could face 100% tariffs.
TSMC Aligns With U.S. Policy, Within Limits
Taiwan Semiconductor Manufacturing Co has already taken steps to align with U.S. policy priorities, committing more than $65 billion to American manufacturing operations.
The company plans to expand those investments to $165 billion, producing chips for major U.S. clients while leveraging financial incentives under the CHIPS and Science Act.
However, Taiwanese authorities require overseas plants to operate using technologies at least two generations behind those deployed domestically, preserving Taiwan’s technological edge.
Structural And Geopolitical Constraints
Industry analysts broadly agree with Cheng’s assessment, citing labor shortages, higher costs, and the complexity of relocating advanced semiconductor manufacturing as major obstacles.
Geopolitical analysts also point to the so-called Silicon Shield theory, which argues Taiwan’s central role in global chip supply deters aggression by making its stability strategically vital.
This strategic logic may further discourage large-scale offshoring, as maintaining technological leadership at home remains a core component of Taiwan’s security and economic strategy.
As part of the trade agreement, Washington agreed to lower tariffs on most Taiwanese goods, while waiving levies on select pharmaceuticals, aircraft components, and scarce natural resources.