Taiwan has given Washington a harsh reality check regarding its semiconductor ambitions. Vice Premier Cheng Li-chiun stated firmly that the US proposal to relocate 40% of the island’s chip supply chain to America is simply not feasible. During a Sunday television interview, Cheng explained that the island’s semiconductor ecosystem took decades to build and cannot just be picked up and moved across the ocean.
This refusal comes despite a massive economic agreement between the two sides. Under the current deal, the Taiwanese government pledged $250 billion in direct investments by its tech firms, backed by another $250 billion in credit to help those companies expand production in the US. In return, Washington lowered tariffs on most Taiwanese goods from 20% to 15% and waived duties on specific items like generic drug ingredients and aircraft parts.
However, the US administration is pushing for more. Howard Lutnick recently declared that America plans to build “giant semiconductor industrial parks” and intends to bring the industry home. He warned that Taiwanese companies refusing to build in the US could face punishing 100% tariffs. The US goal isn’t just to attract giants like Taiwan Semiconductor Manufacturing Co. (TSMC), but also hundreds of smaller suppliers that keep the industry running.
TSMC is already trying to meet US demands. The chipmaker committed over $65 billion to American manufacturing facilities and plans to increase that to $165 billion to serve clients like Apple and Nvidia. Yet, industry analysts agree with Cheng that moving the entire supply chain is a different story. They cite high costs, a lack of skilled labor in the US, and the deep integration of factories in Taiwan as major hurdles.
There is also a strategic reason for Taiwan to resist. Geopolitical experts refer to the “Silicon Shield”—the idea that the world’s reliance on Taiwanese chips forces the US to protect the island from Chinese aggression. To maintain this leverage, Taiwan enforces the “N-2 rule,” requiring TSMC to keep its most cutting-edge technology at home while only sending older manufacturing processes abroad. Taiwan is willing to expand globally, but Cheng made it clear: the industry’s roots will stay in Taiwan.
