Taiwan Rejects U.S. Proposal to Take Over 40% of Chip Supply Chain

• Under a recent U.S.-Taiwan trade deal, Taiwan committed $250 billion in tech investments with an additional $250 billion in credit for U.S. production expansion, while the U.S. reduced tariffs on most Taiwanese goods from 20% to 15%
• TSMC has already committed over $65 billion to U.S. manufacturing with plans to expand to $165 billion, but Taiwan maintains an 'N-2 rule' requiring overseas plants to use chip technologies at least two generations behind Taiwan's most advanced production
• Lutnick warned that Taiwan-based chip companies not building in the U.S. could face 100% tariffs, part of a broader plan to create '$500 billion' semiconductor industrial parks in America

Taiwan Rejects U.S. 40% Chip Supply Chain Relocation Proposal

Key Development:

Taiwan has firmly rejected Washington's proposal to relocate 40% of its semiconductor supply chain to the United States, with Vice Premier Cheng Li-chiun calling the plan "impossible" in a Sunday interview. The proposal was outlined by U.S. Commerce Secretary Howard Lutnick in January following the latest U.S.-Taiwan trade agreement.

Trade Agreement Details:

Under the recent deal, Taiwan committed $250 billion in investment by its tech companies, with an additional $250 billion in credit for U.S. production expansion. In exchange, Washington reduced tariffs on most Taiwanese goods from 20% to 15%, waived duties on generic drugs and aircraft components, and promised priority treatment for Taiwanese chips.

TSMC's Position:

Taiwan Semiconductor Manufacturing Company (TSMC), the world's leading chipmaker, has committed over $65 billion to U.S. manufacturing with plans to expand to $165 billion. The company produces chips for Apple and Nvidia and has received grants under the U.S. CHIPS and Science Act. However, Taiwan maintains its "N-2 rule," requiring overseas plants to use technology at least two generations behind domestic cutting-edge production.

Market Implications:

Lutnick warned that Taiwanese chip companies not building in the U.S. could face 100% tariffs. However, semiconductor analysts support Taiwan's assessment, citing obstacles including Taiwan's deeply integrated ecosystem, U.S. labor shortages, and elevated costs. Taiwan's "Silicon Shield" strategy—maintaining its crucial role in global chip supply—serves as both an economic advantage and geopolitical deterrent against Chinese aggression, further discouraging major supply chain relocation.