Taiwan Wants the U.S. to Understand That Relocating Chip Supply Chain is “Impossible”

Taipei pushes back on Washington’s onshoring ambitions, citing challenges in relocating its decades-old semiconductor ecosystem

Taiwan has told Washington that a proposal to move 40% of the island’s semiconductor supply chain to the United States is “impossible,” Taipei’s top trade negotiator said in an interview.

Speaking on a local television broadcast on Sunday, Vice Premier Cheng Li-chiun said she had made it clear to U.S. officials that Taiwan’s semiconductor ecosystem, built over decades, could not simply be relocated. Taiwan’s international expansion, including investments in the United States, is based on the notion that the industry remains “rooted in Taiwan and continues to expand domestic investments,” she said in Mandarin.

The comments push back against onshoring targets outlined by U.S. Commerce Secretary Howard Lutnick in a January interview shortly after the latest U.S.-Taiwan trade agreement. Lutnick said he wanted 40% of Taiwan’s entire chip supply chain to shift to the United States within President Donald Trump’s ongoing term.

Under the deal, the Taiwanese government pledged $250 billion in direct investments by its technology companies, along with an additional $250 billion in credit to help expand production capacity in the United States. Washington lowered levies on most goods from Taiwan to 15% from 20%, waived tariffs on generic drugs and ingredients, aircraft components and natural resources unavailable domestically, and promised higher quotas for tariff-free exports of Taiwanese chips.

Taiwan Semiconductor Manufacturing Co (TSMC), the world’s leading contract chipmaker, has committed more than $65 billion to U.S. manufacturing in recent years and plans to expand that to $165 billion as it produces chips for American clients Apple and Nvidia. The investments have also leveraged grants under the U.S. CHIPS and Science Act.

Lutnick has said Washington also wants hundreds of smaller companies across the chip supply chain to move to the United States. “We’re going to build giant semiconductor industrial parks in America … This is a $500 billion down payment on let’s bring those semiconductors home,” he said in January, adding that Taiwan-based chip companies that do not build in the United States are likely to face a 100% tariff that Trump has threatened against the sector.

Semiconductor analysts broadly agree with Cheng’s assessment, citing the challenges of relocating such an advanced supply chain. Analysts and industry officials point to Taiwan’s deeply integrated ecosystem, U.S. labor shortages and elevated costs as key obstacles.

Geopolitical analysts have also highlighted the “Silicon Shield” theory, which holds that the island’s pivotal role in global chip supply makes safeguarding its autonomy a U.S. strategic imperative and could deter potential Chinese aggression. Beijing claims sovereignty over the democratically governed island.

Taiwanese authorities have already implemented a policy requiring TSMC’s overseas plants to operate using technologies at least two generations behind the most advanced ones deployed in Taiwan, often referred to as the N-2 rule.

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