TAIPEI (Realist English). Taiwan has told the United States that plans to shift a large portion of the island’s semiconductor supply chain to American territory are not feasible, its top trade negotiator said, pushing back against Washington’s most ambitious onshoring demands.
Speaking on local television on Sunday, Vice Premier Cheng Li-chiun said she had made it clear to US officials that Taiwan’s semiconductor ecosystem — developed over decades — cannot simply be relocated. Proposals to move as much as 40% of the supply chain to the US, she said, are “impossible” to implement.
Her remarks directly challenge earlier statements by US Commerce Secretary Howard Lutnick, who in January said Taiwanese chipmakers would need to expand production in the United States or face punitive tariffs following a new US–Taiwan trade agreement.
Under that deal, Taiwanese technology companies pledged $250 billion in direct investment in the US, alongside a further $250 billion in credit support to expand manufacturing capacity. In exchange, Washington offered higher quotas for tariff-free chip exports. Lutnick has warned that firms failing to build in the US could face tariffs of up to 100%.
Taiwan Semiconductor Manufacturing Co — Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker, has already committed more than $65 billion to US manufacturing projects, with plans to raise total investment to $165 billion. The company produces advanced chips for major American clients, including Apple and Nvidia, and has benefited from incentives under the CHIPS and Science Act.
Despite these moves, industry analysts broadly support Cheng’s position, arguing that relocating a highly specialised and integrated supply chain at scale is impractical. They cite Taiwan’s dense industrial ecosystem, labour shortages in the US and significantly higher production costs as key obstacles.
Geopolitical considerations also loom large. Analysts often point to the so-called “Silicon Shield” — the idea that Taiwan’s central role in global semiconductor supply makes its security a strategic priority for Washington, thereby deterring potential Chinese aggression. Beijing claims sovereignty over the democratically governed island.
Taiwanese authorities have reinforced this logic by restricting the export of cutting-edge technology. Under the so-called N-2 rule, TSMC’s overseas plants must operate at least two generations behind the most advanced processes used in Taiwan.
The US Commerce Department did not immediately comment on Cheng’s statements. As part of the latest trade arrangements, Washington has agreed to reduce tariffs on most Taiwanese goods to 15% from 20%, while waiving duties on certain pharmaceuticals, aircraft components and natural resources unavailable domestically.
TSMC shares rose 2.75% in Taipei trading on Tuesday.