Taiwan says it will resist pressure from Washington to move half of chip production to US

By CNN Newsource

Published October 1, 2025 2:26 AM

By John Liu, CNN

(CNN) — Taiwan has vowed to resist pressure from Washington to shift half of its chip production capacity to the United States, throwing down the gauntlet to the Trump administration.

Washington has grown increasingly concerned about its heavy dependence on Taiwan, where chip giant TSMC supplies the vast majority of the world’s advanced semiconductors to major clients like AI chip designer Nvidia and Apple.

But many in self-ruled Taiwan view its chip-making prowess a “silicon shield” that could deter a potential invasion from China and rally international support for its security.

Taiwan “will not agree” to producing 50% of its semiconductors – vital to everything from electronics and iPhones to training artificial intelligence and weapon systems – on US soil, Taiwan’s Vice Premier Cheng Li-chiun said Wednesday.

“Our negotiating team has never made any commitment to splitting chips 50-50, so the public can rest assured,” she told media after returning from the US after the latest round of tariff negotiations.

US Secretary of Commerce Howard Lutnick sparked alarm among Taiwanese over the weekend by demanding in a TV interview that Taiwan split its chip production evenly between domestic and US facilities – adding fresh tensions to the ongoing US-Taiwan trade talks. Beyond Taipei’s pushback, opposition party officials and experts have also voiced criticism.

In the NewsNation interview, Lutnick referred to the concept of a “silicon shield,” saying the US would need 50% of domestic chip production to protect Taiwan.

“My argument to them was, well, if you have 95%, how am I gonna get it to protect you? You’re going to put it on a plane? You’re going to put it on a boat?” he said, referring to the rough percentage of global advanced chip production in Taiwan.

“If we have half, we have the capacity to do what we need to do, if we need to do it,” he added, without specifying the response the US may take in the scenario of a Chinese attack.

China claims Taiwan as part of its territory despite having never controlled it and has vowed to annex it, by force if necessary.

Lutnick also said that Washington has been in conversations about the proposal with Taipei, and that the Trump Administration’s objective is to increase the market share of made-in-US chips “to 40% and maybe 50%.”

But Cheng said on Wednesday that the idea did not make it into the latest round of bilateral discussions. It was not clear if TSMC was involved in the negotiations between the US and Taiwan.

CNN has reached out to TSMC for comment.

On Monday, Hsu Yu-chen, a legislator of the opposition party Kuomintang (KMT), blasted the US demand as an “outright plunder” instead of “cooperation,” urging the government to reject the demand that she said amounts to “selling out the nation.”

“If the US forces a division of TSMC’s most advanced production capacity, the effectiveness of the ‘Silicon Shield’ will be weakened, and Taiwan’s strategic security leverage will be completely lost,” she said in a statement. “Taiwan needs allies, but not ones who care only about their own security while disregarding Taiwan’s survival.”

On Wednesday, Taiwan’s cabinet said in a statement that the fifth round of trade negotiations just concluded in Washington and led by Cheng has achieved “certain” progress, as officials work toward a goal of reducing US tariffs on Taiwanese goods from the current level of 20%.

Domestically in Taiwan, Washington’s growing list of demands are straining relations with the East Asian economic powerhouse, and risk further souring public sentiment in Taiwan toward the US.

Back in 2020, TSMC responded to US demands and unveiled a groundbreaking $12 billion investment to build advanced chipmaking facilities in Phoenix despite industry and public concerns. Earlier this year, TSMC drastically increased its total investment to $165 billion with additional plants.

These moves have triggered fear and resignation among Taiwanese people, some of whom see the US as using political pressure to rob Taiwan of its proud industry champion and core competitiveness.

Arisa Liu, a director at Taiwan Institute of Economic Research, an independent think tank, said she believes Washington’s latest demand “brings more harm than benefit to Taiwan.”

“Significant investments and capacity shifts toward the US will inevitably weaken Taiwan’s own ecosystem, undermining the integrity of its supply chain,” she said in a statement to CNN, adding that the short-term benefit could be relatively low tariff rates the US imposes on Taiwanese exports.

Taiwan and TSMC owe its success in chipmaking partly to the high concentration of industry players, from silicon wafer suppliers to equipment makers and service providers, experts said. That has contributed to a complete supply chain ecosystem that functions efficiently, a trait required in the manufacturing of semiconductors.

CNN’s Wayne Chang contributed to this report.