The US wants 40% of Taiwan’s semiconductor production to take place in the US – a proposal firmly rejected by Taiwan.

Taiwan’s vice-premier Cheng Li-chiun said it would be “impossible” to move 40% of the country’s semiconductor production capacity, rejecting proposals that it could simply relocate its established supply chain ecosystem outside the country.

This is the latest in the semiconductor trade and technology negotiations that have been ongoing between the Taiwan and the US for many months. 

Taiwan is home to the world’s largest contract chipmaker, TSMC, and the US is its biggest customer base; soaring demand for AI-related technology has only fuelled Taiwan’s trade surplus with the country. While TSMC has invested billions into building chip factories in the US, the bulk of its production is in Taiwan.

US president Donald Trump has accused Taiwan of taking business away from US-based chipmakers. While the US initially imposed a 20% broad tariff on Taiwan’s exports to the country, this was lowered to 15% in January as part of trade and semiconductor negotiations. Under the deal, Taiwanese chipmakers that expand US production will be charged a lower tariff on semiconductors or related manufacturing equipment and products they import into the US, and can import some duty-free.

While no explicit agreement has been reached, in an interview with American news agency CNBC earlier this week, US commerce secretary Howard Lutnick said his goal was to bring 40% of Taiwan’s entire chip supply chain and production to the US. If that is not achieved, he warned, tariffs on Taiwan “would likely rise to 100%”. This follows his proposal for a 50-50 semiconductor production split in September 2025, also firmly rejected at the time by Cheng. 

The US’s desire for production to be relocated is driven by Taiwan’s close proximity to China. As Lutnick put it: “You can't have all semiconductor manufacturing 80 miles from China, that’s just illogical.” 

In response, Cheng told Taiwanese television channel CTS that “40 or 50% of production capacity (being) moved to the United States ... I have made it very clear to the US side that this is impossible.” She added that Taiwan’s semiconductor ecosystem was like an “iceberg”, with the foundation beneath the water being “enormous”, and said that “an industrial ecosystem built up over decades cannot be relocated”.

While Cheng has said that there would be no relocation of Taiwan’s science parks, the country was willing to share its experience of building an industry cluster and help the US develop a similar environment, according to Reuters.

In December 2025, the European Commission approved €623m to support the establishment of two new German semiconductor manufacturing facilities, aiming to reduce Europe’s reliance on global chip suppliers. 

In E+T’s September-October 2025 issue we take a deep dive into the CHIPS and Science Act and the US’s gamble on semiconductors.