Taiwan rejects US proposal to relocate semiconductor production

Taiwan has firmly rejected U.S. proposals to relocate a substantial portion of its semiconductor production capacity to the United States, describing a suggested 40% shift as “impossible.”
In an interview broadcast late Sunday on Taiwanese television channel CTS, Vice Premier Cheng Li-chiun, the island’s top tariff negotiator, stated that she had directly conveyed this position to Washington. She emphasized that Taiwan’s semiconductor ecosystem—developed over decades and encompassing advanced manufacturing, packaging, and the broader supply chain—cannot simply be relocated.
“I have made it very clear to the United States that this is impossible,” Cheng said, referring to the 40% target floated by U.S. officials.
Taiwan, home to the world’s leading contract chipmaker TSMC and producer of the majority of advanced semiconductors globally (including around 90% of the most cutting-edge nodes), remains committed to expanding its domestic industry. Cheng affirmed that overall capacity in Taiwan “will only continue to grow,” with ongoing investments at home forming the foundation for any international expansion.
“Our international expansion, including increased investment in the United States, is based on the premise that we remain firmly rooted in Taiwan and continue to expand investment at home,” she added.
The comments come amid heightened U.S. efforts to onshore critical semiconductor manufacturing, driven by national security concerns over Taiwan’s proximity to China. U.S. Commerce Secretary Howard Lutnick has repeatedly pushed for significant relocation, arguing that heavy concentration of advanced chip production “80 miles from China” is illogical.
In remarks earlier this month, Lutnick stated: “You can’t have all semiconductor manufacturing 80 miles from China. That’s just illogical… So we need to bring it back.” He outlined a goal for the current administration to achieve 40% market share in leading-edge semiconductor manufacturing by the end of its term. In prior interviews, including one on CNBC last month, Lutnick suggested aiming for 40% of Taiwan’s entire chip supply chain and production to shift to the U.S., warning that failure to do so could lead to tariffs on Taiwanese exports rising as high as 100%. He had previously floated a 50-50 split in chip production.
Taiwan and the U.S. reached a trade agreement last month that reduced tariffs on the island’s exports to 15% from 20%, in exchange for increased Taiwanese investment in the U.S.
Cheng clarified that no relocation of Taiwan’s science parks or transfer of its most advanced technologies is on the table. However, she expressed willingness to share expertise in building industry clusters to help the U.S. develop its own ecosystem. She expressed confidence that Taiwan’s total semiconductor capacity—including existing facilities, those under construction, and planned projects—would continue to far outpace investments abroad, including in the United States.
TSMC has already committed significant resources to U.S. expansion, with a total planned investment of $165 billion in Arizona, including multiple fabs, advanced packaging facilities, and an R&D center. The company is accelerating these efforts in response to demand, particularly for AI-related chips, but maintains that core advanced production remains rooted in Taiwan.
The disagreement highlights ongoing tensions in U.S.-Taiwan relations over supply chain security, even as both sides cooperate on trade and investment to bolster resilience in critical technologies.