Taiwan has rejected a US proposal to produce half of its semiconductors in the United States, according to the island’s lead tariff negotiator on Wednesday. Vice Premier Cheng Li-chiun responded to US Secretary of Commerce Howard Lutnick’s proposal for a 50-50 split in chip production. Cheng clarified that the proposal was the US’s idea and that Taiwan’s negotiation team had never committed to a 50-50 chip production split, assuring reporters that Taiwan did not discuss this issue and will not agree to such a condition.
Background of US-Taiwan Trade Negotiations
Cheng spoke after returning from Washington, where she reported progress in negotiations over US tariffs on Taiwanese shipments. Taiwan is struggling to finalize a tariff deal with Washington after the Trump administration imposed a temporary 20% levy, alarming Taiwanese manufacturers. President Donald Trump has also threatened to impose a “fairly substantial tariff” on incoming semiconductors.
Soaring demand for AI-related technology has increased Taiwan’s trade surplus with the US, drawing Trump’s attention. More than 70% of Taiwan’s exports to the US consist of information and communications technology, including chips, according to a cabinet statement on Wednesday. To avoid tariffs, Taipei has pledged to increase investment in the US, buy more American energy, and raise its defense spending to over 3% of GDP.
Taiwan’s Semiconductor Industry and Geopolitical Implications
Taiwan produces more than half of the world’s semiconductors and nearly all of the high-end ones. Taiwan’s dominance in chip manufacturing has been viewed as a “silicon shield” against potential Chinese invasion or blockade, as China claims Taiwan as its territory, which also serves as an incentive for the US to defend Taiwan.
In a weekend interview with NewsNation, Lutnick stated that having 50% of Taiwan’s chip production in the US would ensure the country’s capacity to act when necessary. “Our goal is to achieve a 40% to 50% market share in producing the semiconductors needed for American consumption,” Lutnick said.
