Taiwan has rejected a U.S. proposal to locally manufacture half of the chips it supplies, signaling a firm stance on its semiconductor production strategy.
Taiwan has firmly declined Washington’s proposal to locally manufacture half of the chips it currently supplies to the United States, according to the island’s top trade negotiator.
Cheng Li-chiun, who also serves as Taiwan’s vice premier, addressed reporters on Wednesday, stating that the suggestion for a “50-50” split in semiconductor production was never even discussed. Her comments came after returning from trade talks in the U.S., as reported by Taiwan’s Central News Agency.
The U.S. has been in discussions with Taipei regarding this “50-50” production model, which aims to reduce American reliance on Taiwanese semiconductor manufacturing. Commerce Secretary Howard Lutnick mentioned in a recent interview with NewsNation that currently, 95% of U.S. demand for chips is met by production within Taiwan.
“My objective, and this administration’s objective, is to get chip manufacturing significantly onshored — we need to make our own chips,” Lutnick stated. “The idea that I pitched [to Taiwan] was, let’s get to 50-50. We’re producing half, and you’re producing half.”
However, this proposal has faced backlash from Taiwanese politicians. Eric Chu, chairman of the Kuomintang, Taiwan’s principal opposition party, condemned the idea as “an act of exploitation and plunder.” He emphasized that “no one can sell out Taiwan or TSMC,” referring to the Taiwan Semiconductor Manufacturing Company, which is a global leader in advanced chip manufacturing.
The backdrop to these discussions includes the U.S. imposing a 32% tariff on select Taiwanese exports, effective April 9. This move is part of a broader strategy to address significant trade imbalances. The tariffs were announced after President Donald Trump implemented a universal 10% tariff on all imports starting April 5, with additional tariffs for countries with large trade surpluses. Taiwan’s electronic components, high-tech machinery, and industrial goods were primarily targeted, although semiconductors and other critical sectors were exempted to maintain strategic economic interests.
The Taiwanese government has strongly opposed these tariffs, labeling them “deeply unreasonable” and warning of potential negative impacts on its economy. Forecasts indicated that the tariffs could slow Taiwan’s GDP growth by as much as 1.6 percentage points, raising concerns about supply chain disruptions and diminished competitiveness in the U.S. market.
Instead of retaliating, Taiwan has opted for a diplomatic approach focused on negotiation and cooperation. Taiwanese officials have engaged in talks with the U.S. to seek tariff reductions and explore expanded bilateral industrial partnerships, particularly in high-tech sectors.
Taiwan’s “Taiwan model” emphasizes strategic investment, government support, and the development of Taiwan-U.S. industrial clusters to strengthen economic ties while minimizing supply chain relocations. President Lai Ching-te has also announced plans to purchase $10 billion in U.S. agricultural goods, signaling a commitment to cooperation amid ongoing tensions.
The rejection of the proposed 50-50 chip production split has significant implications for America’s technology and national security strategy. The U.S. has been striving to reduce its reliance on foreign semiconductor manufacturing, particularly from Taiwan, which currently produces over 60% of the world’s chips and more than 90% of the most advanced ones. A 50-50 production model was viewed as a step toward reshoring critical infrastructure and mitigating risks associated with geopolitical tensions with China.
With Taiwan unwilling to divide production evenly, the U.S. faces a more challenging path toward achieving chip independence. The country will need to rely more heavily on domestic incentives, such as the CHIPS Act, to attract investment and scale up manufacturing at home. Taiwan’s stance also highlights its willingness to partner strategically, but it will not relinquish control over its competitive edge.
This rejection may further strain trade negotiations, particularly regarding tariff reductions that the U.S. has linked to deeper semiconductor cooperation. Ultimately, the U.S. must now reconsider how to build resilience in its chip supply chain, potentially by diversifying partnerships beyond Taiwan, accelerating domestic fabrication development, and investing in workforce and research and development, without expecting foreign partners to significantly shift production offshore.
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