Washington’s call for Taiwan to shift half of its semiconductor production to the United States has sparked unease in Taipei, where officials and analysts warn that hollowing out the island’s chip dominance could weaken its strategic deterrent against aggression by the communist mainland Chinese regime.
U.S. Commerce Secretary Howard Lutnick told NewsNation on Sept. 27 that Washington has pressed Taiwan to move toward an equal split in chip production, arguing that the current concentration of advanced semiconductor manufacturing in Taiwan poses unacceptable risks.
Taiwan, formally known as the Republic of China (ROC), is in talks with the Trump administration over the 20 percent tariff Washington currently has on many Taiwanese goods.
“My objective, and this administration’s objective, is to get chip manufacturing significantly onshored — we need to make our own chips,” Lutnick said. “The Chinese have said, ‘We’re going to take Taiwan.’ Like, they’re not even shy about it. So this is an issue.”
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Taiwan produces around 95 percent of the world’s most advanced semiconductors, primarily through Taiwan Semiconductor Manufacturing Co. (TSMC).
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The communist People’s Republic of China (PRC) considers the ROC, which it overthrew on the Chinese mainland in 1949, a renegade force. Beijing says it will bring about the “reunification” of Taiwan with the PRC by any means necessary.
Lutnick said that the dependence on Taipei for chip productor leaves both Washington and Taipei exposed: “If you have 95 percent [of semiconductor production], how am I going to get it to protect you? You’re going to put it on a plane? You’re going to put it on a boat? … The idea that I pitched them was, let’s get to 50-50.”
The administration’s long-term goal, he added, is to capture at least 40 percent of global semiconductor production, a shift that he estimated would require $500 billion in U.S. investment.
Taiwan rejects 50-50 proposal
Taipei has responded cautiously but firmly. Vice Premier Cheng Li-chiun, Taiwan’s chief negotiator in ongoing tariff talks with Washington, said on Oct. 1 that Lutnick’s comments did not reflect the reality of negotiations.
“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,” Cheng told reporters after returning from Washington, according to the Central News Agency.
Premier Cho Jung-tai also emphasized on Sept. 30 that discussions with the United States had reached their “crucial final stages” and remained focused on trade tariffs, not semiconductor relocation. Taiwanese exports to the U.S. were valued at $111.4 billion in 2024, of which semiconductors made up $7.4 billion, but they remain subject to a 20 percent tariff.
Cheng said “detailed” talks had yielded “certain progress,” though she did not provide specifics. Neither the U.S. Commerce Department nor the Office of the U.S. Trade Representative responded to requests for comment outside of U.S. business hours.
Maintaining a ‘Silicon Shield’
For years, Taipei’s outsized role in semiconductor manufacturing has been seen as the island’s “silicon shield” — a deterrent against potential attack by Communist China because of the catastrophic global fallout that would result from a supply disruption.
A 2024 report by Rice University’s Baker Institute warned that Taiwan falling to a mainland Chinese invasion could trigger semiconductor shortages leading to economic damage “on a par with, or worse than, that caused by World War II.”
Analysts in Taipei fear that shifting too much production abroad could erode that deterrent. Liu Pei-chen, a researcher at the Taiwan Institute of Economic Research, told CNA on Sept. 29 that Washington’s push effectively “redefines the term ‘silicon shield,’” moving from Taiwan’s exclusive dominance to “a mutual reliance built on shared manufacturing capacity.”
While such an approach may serve U.S. security, Liu warned it could leave Taiwan with diminished leverage against Beijing.
TSMC’s US Investments
The world’s leading developer of advanced computer chips, TSMC has already made major economic commitments in the United States. The company is investing $165 billion to build three fabs in Arizona, including advanced packaging facilities and a research hub.
In January, then-Commerce Secretary Gina Raimondo announced that one factory had begun producing 4-nanometer chips for U.S. clients. In March, TSMC unveiled plans for additional large-scale investments in American operations.
But despite these moves, TSMC has signaled that the “bulk” of its production will remain in Taiwan. Asked about Lutnick’s comments, the company declined to comment.
Taiwanese officials remain focused on achieving more favorable trade terms. “The most critical substantive consultations are currently underway,” Premier Cho told parliament this week. Taipei hopes the tariff issue can be resolved in a way that strengthens, rather than undermines, the island’s economic and security position.
At the same time, Taipei has broadened its trade agenda. On Sept. 30, President Lai Ching-te met with Luke J. Lindberg, U.S. Under Secretary for Trade and Foreign Agricultural Affairs. Lai highlighted Taiwan’s plan to buy $10 billion worth of U.S. agricultural products over the next four years, including soybeans, wheat, corn, and beef.
In his Sept. 27 comments, however, Lutnik stated the U.S. position directly: “We’re still fundamentally reliant upon you because we cannot live without the other half. But if we have half, we have the capacity to do what we need to do, if we need to do.”
Reuters contributed to this report.
