Taiwan rebuffs U.S. push to absorb 40% of its chip supply chain

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

talking about something local television broadcast On Sunday, Vice Premier Cheng Li-chiun said he had made clear to Washington that it would not be possible to simply move the country’s decades-old semiconductor ecosystem elsewhere.

The comments roll back the goals of reaching the limit outlined by U.S. Commerce Secretary Howard Lutnick in an interview with CNBC in January, shortly after the latest U.S.-Taiwan trade deal. Lutnick said Taiwan wants 40% of its entire chip supply chain to shift to the United States during President Donald Trump’s ongoing term.

According to the agreement, the Taiwanese government I promised 250 billion dollars in direct investments An additional $250 billion loan was provided by technology companies to expand their production capacity in the USA. In return, Taiwanese companies were promised higher quotas for duty-free exports their chips to the USA

Taiwan Semiconductor Manufacturing Co, the world’s leading contract chipmaker and maker of the most advanced semiconductors, is already working to better align with U.S. policy interests.

The company has committed more than $65 billion to U.S. manufacturing in recent years and plans to increase that to $165 billion as it produces chips for American customers Apple and Nvidia. Investments also benefited from grants under the US CHIPS and Science Act.

But Washington is pursuing hundreds more small companies in the chip supply chain to come to the United States, according to Lutnick.

“We’re going to build giant semiconductor industrial parks in America… This is a $500 billion down payment on bringing semiconductors home,” he said in January, adding that Taiwan-based chip companies that don’t manufacture in the United States would likely face 100% tariffs.

But semiconductor analysts generally agree with Cheng’s assessment that Washington’s most ambitious onshore deployment plans are unfeasible, citing the difficulties of relocating such an advanced supply chain.

Analysts and industry officials cite Taiwan’s deeply integrated semiconductor ecosystem, a U.S. labor shortage and high costs as some of the key hurdles.

Geopolitical analysts have also noted the “Silicon Shield” theory, which suggests that the island’s important role in global chip supply deters potential Chinese aggression by making preserving its autonomy a US strategic imperative. Beijing claims sovereignty over the democratically governed island.

This Silicon Shield could further deter Taiwan from shifting its supply chains abroad.

Taiwanese authorities have already implemented a policy requiring TSMC’s facilities abroad to operate using technologies that are at least two generations behind state-of-the-art facilities deployed in Taiwan; this policy is often referred to as the N-2 rule.

The U.S. Department of Commerce did not immediately respond to a request for comment on Cheng’s statement.

As part of the latest trade deals, Washington said it would reduce duties on most goods from Taiwan from 20% to 15% and waive tariffs on generic drugs and ingredients not available domestically, aircraft components and natural resources.

TSMC shares were trading 2.75% higher in Taiwan on Tuesday.

— CNBC’s Matthew Chin contributed to this report.