Taiwan rejects US demand for 50% chip production split, defending ‘Silicon Shield’

Taiwan has forcefully rejected a proposal from Washington to require half of the semiconductors it supplies to the United States to be manufactured on U.S. soil. The move, which comes amid tense trade negotiations, underscores Taiwan’s determination to maintain control over its crown jewel industry.

Taiwanese Vice Premier Cheng Li-chiun, the island's lead tariff negotiator, publicly denied that any such commitment had been made during recent talks in Washington, insisting that Taiwan "will not agree to such conditions."

"I want to clarify that this is the U.S.'s idea," Cheng told reporters upon her return to Taipei. "Our negotiation team has never made a 50-50 commitment to a chip split... We will not agree to such a condition. Please rest assured."

A clash of strategic visions

The proposal for an even 50-50 split was recently pitched by U.S. Commerce Secretary Howard Lutnick, who framed the demand as a crucial national security measure. Washington is intent on reducing its dependence on Taiwan's concentrated chip production, particularly given the risk of conflict with China.

However, Taiwan views its semiconductor dominance, led by the world’s most advanced chipmaker, TSMC, as its "Silicon Shield" - a geopolitical asset that deters aggression by making any military conflict too costly for the global economy.

Taiwan's Stance: Leaders and opposition politicians widely condemned the proposal, arguing that relocating a substantial portion of production would dilute Taiwan's leverage and "hollow out the foundations of Taiwan's technology sector."

US Stance: The U.S. insists domestic manufacturing capacity is "vital" to ensure supply chain resilience, especially for critical sectors like defense and AI, which rely heavily on advanced Taiwanese logic chips.

Trade tensions escalating

The disagreement over production quotas complicates ongoing trade negotiations. Taiwan is currently struggling to secure relief from a temporary 20% tariff the U.S. imposed on Taiwanese exports. The tariff affects its massive information and communications technology sector, of which over 70% is composed of chips.

Despite the rejection of chip production, Taiwan is attempting to ease overall tensions by pledging to increase U.S. investments, boost energy purchases, and raise its defense spending. Its latest move is a $165 billion investment in new factory projects in Arizona.