Taiwan has firmly rejected U.S. demands to relocate half of its semiconductor production to American soil, intensifying tensions in ongoing trade talks with Washington. Vice Premier Cheng Li-chiun clarified that Taiwan’s negotiating team has made “no commitment” to splitting chip capacity, assuring the public that the government would not compromise the island’s strategic interests.
The U.S. has grown increasingly concerned about its dependence on Taiwan’s chipmaking industry, dominated by TSMC. This company produces the vast majority of the world’s most advanced semiconductors for companies like Nvidia and Apple. U.S. Commerce Secretary Howard Lutnick argued that shifting 50% of production capacity would strengthen the so-called “silicon shield,” which Taiwan sees as both an economic advantage and a deterrent against potential Chinese aggression.
Taiwanese officials and opposition lawmakers, however, strongly criticized the proposal. Kuomintang legislator Hsu Yu-chen condemned it as “plunder” rather than cooperation, warning that dividing TSMC’s capacity would erode Taiwan’s security leverage. Analysts echoed this concern, stressing that relocating significant production to the U.S. could weaken Taiwan’s tightly integrated semiconductor ecosystem, which relies on the close concentration of suppliers, manufacturers, and service providers.
While TSMC has already committed billions to building advanced facilities in Arizona, the government and public in Taiwan remain wary. Many fear that Washington’s mounting demands undermine the island’s strategic autonomy and risk hollowing out its most important industry.
Meanwhile, trade talks between the two sides continue, with Taiwan seeking tariff reductions on its exports. But the controversy over chip production highlights the growing strain in U.S.-Taiwan relations, as the island balances its economic partnership with Washington against the preservation of its vital “silicon shield.”
Reference
Chang, W. (2025, October 1). Taiwan says it will resist pressure from Washington to move half of chip production to US. CNN. https://edition.cnn.com/2025/10/01/business/taiwan-resist-us-pressure-move-chip-production-intl-hnk