Taiwan officially rejected a proposal from the U.S. government to relocate 40% of its semiconductor manufacturing capacity to American soil.
In a televised interview, Taiwan’s Vice Premier and top trade negotiator, Cheng Li-chiun, described the demand as “impossible,” marking a firm stance against the Trump administration’s aggressive “onshoring” strategy.
1. The “Iceberg” Argument
Vice Premier Cheng emphasized that Taiwan’s semiconductor industry is not just a collection of factories that can be moved, but a deeply integrated ecosystem built over four decades.
- Structural Integration: She compared the industry to an “iceberg,” where the visible factories are supported by a massive, invisible foundation of thousands of local suppliers, research institutions, and specialized labor.
- Non-Relocatable: Cheng clarified that Taiwan has no intention of relocating its science parks. While Taiwan is willing to help the U.S. build its own “industrial clusters” by sharing experience, the core manufacturing base will remain firmly rooted on the island.
- Capacity Growth: She noted that Taiwan’s domestic capacity will continue to grow even as it expands its global footprint, ensuring that overseas investments do not “hollow out” the local industry.
2. The U.S. “40% Goal” and the 100% Tariff Threat
The rejection follows repeated public statements by U.S. Commerce Secretary Howard Lutnick, who has made reshoring a central pillar of U.S. economic policy.
- The Goal: Lutnick stated that the administration’s goal is to secure 40% of leading-edge semiconductor manufacturing within the United States before the end of the current term (2029).
- The “Stick”: In a CNBC interview in January 2026, Lutnick warned that if Taiwan does not comply with this large-scale relocation, U.S. tariffs on Taiwanese goods could rise to as high as 100%.
- The Logic: Lutnick has described the current concentration of production just “80 miles from China” as “illogical” from a national security and supply-chain perspective.
3. The $250 Billion Trade Compromise
Despite the friction over production targets, both nations reached a major interim trade deal in January 2026:
- Tariff Cut: The U.S. agreed to lower tariffs on Taiwanese exports from 20% to 15%.
- Investment Pledge: In exchange, Taiwan committed to $250 billion in direct U.S. investments from its tech and energy firms, plus another $250 billion in credit guarantees to help its smaller supply-chain partners move to America.
- TSMC’s Role: As part of this push, TSMC (the world’s largest chipmaker) has reportedly agreed to expand its Arizona commitment to a total of 11 factories, with advanced 2nm production expected to be a key focus of the new plants.
4. Feasibility: Hype vs. Reality
Industry analysts and Taiwanese officials remain skeptical about the U.S. timeline:
- The 15% Cap: Most experts estimate that by 2029, less than 15% of TSMC’s advanced manufacturing will actually be in the U.S., given the complexity of building fabs and training local talent.
- A 50-50 Rejection: In late 2025, Taiwan had already rejected an even more ambitious “50-50 split” proposal, signaling a consistent policy of protecting its “Silicon Shield.”
Conclusion: Strategic Divergence
Taiwan’s “impossible” declaration highlights the growing tension between U.S. national security goals and Taiwan’s economic survival. While Taipei is willing to be a massive investor in the U.S. economy, it is refusing to dismantle the very industrial dominance that serves as its primary deterrent against external aggression.
