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Taiwan Rejects U.S. Proposal on Chip Manufacturing

Taiwan has firmly dismissed a U.S. proposal to manufacture half of the semiconductors currently supplied to America, saying trade negotiations remain focused on tariffs rather than production quotas.

Cheng Li-chiun, Taiwan’s top trade negotiator and vice premier, clarified after her return from Washington that the so-called “50-50” plan was not even brought to the table during the recent bilateral talks. Instead, Taiwan pressed its case on tariff reductions, particularly exemptions from “tariff stacking” and relief from reciprocal tariff rates that currently sit at 20%.

“Discussions centered on lowering trade barriers and securing fair treatment for Taiwanese exports,” Cheng said.

What the U.S. Wants

The idea of rebalancing chip production was raised last week by U.S. Commerce Secretary Howard Lutnick, who told NewsNation that the U.S. is too dependent on Taiwan’s semiconductor industry. Currently, an estimated 95% of chips imported into the U.S. are made in Taiwan, a figure that has long been a concern for Washington policymakers.

“My objective, and this administration’s objective, is to significantly onshore chip manufacturing. We need to make our own chips,” Lutnick said. “I proposed a 50-50 approach: Taiwan produces half, and we produce half.”

This push comes at a time when the U.S. is already investing heavily in its domestic semiconductor industry through the CHIPS and Science Act, which earmarked $52 billion in subsidies to strengthen American manufacturing. However, critics argue that building advanced foundries will take years, while Taiwan’s established industry remains decades ahead in scale and expertise.

Taiwan Pushes Back

Taiwanese leaders quickly rejected the notion of ceding such a large share of their global dominance. Eric Chu, chairman of the opposition Kuomintang party, described the U.S. proposal as “an act of exploitation and plunder,” warning that Taiwan’s most important strategic asset should not be bargained away.

“No one can sell out Taiwan or TSMC, and no one can undermine Taiwan’s silicon shield,” Chu said, referring to Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker and the producer of over 60% of the world’s advanced semiconductors.

Huang Kuo-chang, chairman of the Taiwan People’s Party, also criticized the U.S. approach, calling it an attempt to “hollow out the foundations of Taiwan’s technology sector.”

The Strategic Role of Taiwan’s “Silicon Shield”

Taiwan’s dominance in semiconductor production has long been described as its “Silicon Shield” — a strategic deterrent against military aggression from China. With companies like TSMC supplying chips to leading global firms such as Apple, Nvidia, and Qualcomm, Taiwan holds an indispensable role in the global supply chain.

U.S. officials, however, argue that this heavy reliance poses risks. Lutnick suggested that diversifying production would make Taiwan “safer” by reducing its vulnerability. But many in Taipei disagree, insisting that Taiwan’s monopoly strengthens its geopolitical leverage and international importance.

Trade Talks Focus: Tariffs, Not Chips

While Washington appears increasingly concerned about overreliance on Taiwan’s chip industry, Taipei’s negotiators are laser-focused on trade barriers. Taiwan faces steep tariffs on goods entering the U.S., including technology exports.

Cheng emphasized that reducing tariff rates and securing exemptions would not only benefit Taiwan but also strengthen U.S.–Taiwan trade ties in sectors beyond semiconductors. “We need to ensure fair market access and competitiveness for our industries,” she said.

Currently, Taiwan’s exports to the U.S. are valued at more than $100 billion annually, with semiconductors making up the lion’s share. Lowering tariffs could significantly boost trade in other industries such as machinery, medical devices, and green technologies.

A Growing Divide Between Washington and Taipei

The disagreement highlights a growing rift between Washington’s long-term industrial strategy and Taipei’s immediate trade priorities. For Taiwan, semiconductors are not only an economic lifeline but also a security guarantee. For the U.S., they represent a strategic vulnerability that must be reduced.

As both sides continue negotiations, it remains clear that while Washington wants to rebalance production, Taipei is unwilling to compromise its strongest advantage. Instead, Taiwan is pushing hard for tariff cuts — a goal that could reshape the trade relationship in ways just as impactful as chip manufacturing.