In a clear signal of Taiwan's commitment to safeguarding its dominance in the global chip industry, the island's government has categorically dismissed a U.S. proposal to evenly divide semiconductor production between the two nations. The rejection underscores Taiwan's strategy to retain control over its most advanced technologies amid escalating geopolitical tensions and supply chain vulnerabilities.
The Proposal and Taiwan's Swift Response
The idea of a "50-50" split emerged from U.S. Commerce Secretary Howard Lutnick, who advocated for halving the production of chips consumed by the U.S. on American soil to reduce reliance on Taiwan.
Currently, Taiwan manufactures over 90% of the world's most advanced semiconductors, primarily through Taiwan Semiconductor Manufacturing Company (TSMC), the industry's undisputed leader. Lutnick framed the push as a national security imperative, aiming to elevate U.S.-made chips' market share to 40-50%.
Taiwan's Vice Premier and Minister of Economic Affairs, Cheng Li-chiun, addressed the matter head-on upon returning from trade negotiations in Washington.
Speaking to reporters at Taoyuan International Airport, she stated unequivocally: "Our negotiating team has never made any commitment to a 50-50 split on chips.
Rest assured, we did not discuss this issue during this round of talks, nor would we agree to such conditions." The talks, she clarified, focused instead on tariff reductions, exemptions from U.S. trade levies, and bolstering supply chain cooperation - issues far removed from any production relocation demands.
This stance aligns with broader Taiwanese policy. Economic Minister J.W. Kuo has emphasized that overseas factories are viable only if they secure real orders, generate profits, and pose no risks to national security or technological edge. Premier Cho Jung-tai and President Lai Ching-te have echoed this, reinforcing that TSMC's core R&D and leading-edge nodes - essential for AI, high-performance computing, and defense applications - will remain firmly on the island.
TSMC's Balancing Act: Global Expansion Without Surrender
TSMC, which commands a surging business fueled by AI demand from clients like Nvidia and Apple, has committed $165 billion to construct six advanced fabs in Arizona, a testament to U.S.-Taiwan collaboration. This investment, building on an initial $12 billion pledge, aims to localize some production while creating thousands of jobs in the U.S.
However, Taiwan insists on asymmetry: For every U.S. facility, TSMC is erecting ten on home soil, with plans for even more. This ensures that the most sophisticated processes, such as 2nm and below, stay protected.
As Kuo noted, foreign plants must prove their economic viability without compromising Taiwan's "silicon shield" - the strategic deterrent that leverages chip supremacy to ward off potential threats from Beijing, which claims the island as its territory.
The proposal's rejection drew bipartisan backlash in Taiwan. Kuomintang Chairman Eric Chu decried it as "an act of exploitation and plunder," warning that no one could "sell out Taiwan or TSMC" or erode the silicon shield. Legislator Hsu Yu-chen of the opposition called it "outright plunder" rather than cooperation.
Roots in the 2020-2021 Supply Chain Crisis
The U.S. push stems from the semiconductor shortages of 2020-2021, exacerbated by the COVID-19 pandemic, which crippled global auto, electronics, and tech sectors and exposed America's overdependence on Asian manufacturing. With Taiwan producing the majority of advanced chips - vital for everything from iPhones to AI training and weapon systems - Washington views the status quo as a vulnerability, especially amid U.S.-China rivalry.
To counter this, the U.S. has poured billions into domestic incentives, including a recent 10% equity stake in Intel. Yet, full reshoring remains elusive: Analysts estimate relocating cutting-edge production could take years and inflate costs by 20-30% due to higher labor, energy, and infrastructure expenses in the U.S.
As a result, the Biden-Trump administrations have pivoted to "friendshoring" - distributing supply chains among trusted allies like Taiwan, South Korea, and Japan - to mitigate risks without outright confrontation.
Tariffs loom as a potential lever; reports suggest the U.S. may impose duties on firms not sourcing sufficient American-made chips, though TSMC's Arizona investments could exempt it.
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Broader Implications for Global Tech Geopolitics
Taiwan's rebuff highlights the tension between economic interdependence and national sovereignty in the semiconductor arena. While the U.S. seeks to diminish its 95% reliance on imported advanced chips, Taiwan views its industry as an existential asset - not just economically, but as a bulwark against coercion. Lutnick downplayed the silicon shield, arguing balanced production would enhance Taiwan's security, but Taipei remains unmoved.
Market reactions have been jittery: Earlier rumors of a U.S. equity stake in TSMC triggered a 2.5% dip in Taiwan's stock index. Yet, with AI-driven demand propelling TSMC's revenues, the company's calculated expansion - global reach without ceding control - positions it as a winner in this high-stakes game.
As negotiations continue, expect more friction. The U.S. CHIPS Act will fuel domestic builds, but Taiwan's resolve signals that true diversification requires partnership, not partition. In an era of techno-nationalism, the chip wars are far from over.
