Taiwan has firmly rejected a U.S. push to move 40 per cent of its semiconductor supply chain to American soil, calling the plan “impossible” given the depth of its domestic industry. The island’s top trade negotiator told Washington that Taiwan’s tightly integrated chip ecosystem, built over decades, cannot simply be uprooted and recreated overseas.
The remarks follow comments by U.S. Commerce Secretary Howard Lutnick, who said he wants roughly 40 per cent of Taiwan’s chip supply chain shifted to the United States during President Donald Trump’s current term.
Vice Premier Cheng Li‑chiun, speaking on national television, stressed that the island’s network of foundries, equipment makers, packaging firms and engineers would not move en masse without serious disruption to global supply lines. Analysts broadly agree that Washington’s most ambitious reshoring goals are unrealistic in practice.
The dispute comes against the backdrop of a broader U.S.-Taiwan semiconductor pact, under which Taiwanese technology firms pledged 250 billion U.S. dollars in direct investment in U.S. manufacturing and infrastructure, plus another 250 billion in credit guarantees to expand production capacity. In return, the United States agreed to cut tariffs on most goods from Taiwan from 20 per cent to 15 per cent and to waive duties on generic medicines, certain aircraft parts and some natural resources not available domestically.
Taiwan Semiconductor Manufacturing Co, the world’s top contract chipmaker, has already committed over 65 billion dollars to its U.S. operations and plans to raise total spending to about 165 billion dollars. Its American plants produce chips for clients such as Apple and Nvidia, supported by incentives from the CHIPS and Science Act, yet those moves still fall short of Washington’s 40 per cent‑onshoring target.
Experts point to deep structural obstacles, from a scarcity of specialised engineers abroad to tightly woven local supplier networks and long‑held know‑how, making a rapid relocation difficult. U.S. labour shortages, higher construction costs and regulatory delays have already slowed the ramp‑up of TSMC’s Arizona factory and other American projects, which weakens the case for shifting hundreds of smaller chip‑supply firms.
Geopolitical analysts often refer to a “Silicon Shield” effect, arguing that Taiwan’s central role in advanced‑chip production offers it some protection, since any major disruption would damage the global technology sector. Beijing still claims sovereignty over the democratically governed island, and the shield argument regularly shapes security and industrial‑policy talks in both Washington and Taipei. That dynamic may further discourage Taiwan from shifting large parts of its supply chain abroad.
Taiwanese authorities also rely on an internal rule that shapes outward investment: TSMC’s overseas plants must use technologies at least two generations behind the most advanced nodes deployed in Taiwan, a practice commonly known as the N‑2 standard. This condition limits the export of the most sensitive know‑how while letting the firm diversify physical risk overseas.
U.S. officials have not yet issued a detailed public rebuttal to Cheng’s statement, though high‑level talks continue. Washington aims to reduce its dependence on overseas chip supply, but Taiwan signals it will only accept a gradual, commercially driven form of onshoring rather than a sudden overhaul of its industrial base.