Taiwan has told the US that its plan to move nearly 40% of its semiconductor supply chain to America is “impossible,” CNBC reported.
Taipei’s top customs trade negotiator, Vice Premier Cheng Li-chiun, made the remarks on local television on Sunday, adding that it made it clear to Washington that Taiwan’s semiconductor ecosystem, built over decades, cannot simply be relocated.
Read also | Trump Imposes 25% Tariff on Semiconductors — What Does It Mean? Explained
She added that Taiwan’s international expansion, including investment in the US, is based on the understanding that the semiconductor industry will remain rooted in Taiwan and continue to expand domestically.
Read also | TSMC chip maker Nvidia sees top revenue estimates
Her remarks were in response to onshoring targets set by US Commerce Secretary Howard Lutnick, who told CNBC in January that he wanted 40% of Taiwan’s chip supply chain to move to the United States during President Donald Trump’s current term. Lutnick’s comments came days after the two sides signed a trade deal.
US-Taiwan Trade Agreement
As part of the trade deal, Washington cut tariffs on most Taiwanese goods to 15% from a previously announced 20%. It also waived tariffs on generic drugs, additives, aircraft parts and natural resources unavailable domestically, and promised higher quotas for duty-free exports of Taiwanese chips to the US. Taiwan, on the other hand, has pledged $250 billion in direct investment from its technology companies, along with $250 billion in credit support, to help expand its manufacturing capacity in the United States.
TSMC is taking steps to comply with US policies
Following the agreement, Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest chipmaker, began taking steps to align more closely with US policy.
In recent years, TSMC has pledged more than $65 billion in U.S. manufacturing and has said it plans to significantly increase that to $165 billion, supplying chips to U.S. firms such as Apple and Nvidia. These investments also drew support through grants under the US Chip and Science Act.
However, Lutnick said Washington is seeking commitments not only from the major players but also from hundreds of smaller firms throughout the semiconductor supply chain. “We’re going to build massive semiconductor industrial parks in America. This is a $500 billion down payment to bring those semiconductors back home,” he said in January, warning that Taiwan-based chipmakers that fail to establish operations in the US could face 100% tariffs, as Trump has threatened.
US Plans Chip Tariff Exemption for Big Tech
The Trump administration is considering exempting big tech companies such as Amazon, Google and Microsoft from new taxes on imported computer chips as the companies race to build data centers fueling the artificial intelligence (AI) boom, according to a Financial Times report.
Washington is considering tariff exemptions for hyperscale technology companies, tying the relief to investment commitments from TSMC.
Washington’s relocation plans for Taiwan’s chip industry unfeasible: Analysts
Semiconductor analysts agreed with Cheng’s assessment, calling Washington’s onshoring plans “unfeasible” based on the difficulty of relocating such an advanced supply chain. They also pointed to some key obstacles, including a U.S. labor shortage and increased costs, CNBC reported.
Analysts have also cited the so-called “Silicon Shield” theory, which argues that Taiwan’s central role in the global semiconductor supply chain makes protecting its autonomy a strategic priority for the United States, thereby deterring potential aggression from China. Beijing claims sovereignty over the self-governing island.
The so-called Silicon Shield further discourages Taiwan from moving its supply chains abroad.
