The Taiwan Semiconductor Manufacturing Company logo is visible in the background next to the printed circuit board.
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Taipei’s top customs and trade negotiator said in an interview that Taiwan has told Washington that its proposal to transfer 40% of Taiwan’s semiconductor supply chain to the United States is “impossible.”
In a local television broadcast on Sunday, Vice Prime Minister Zheng Liqianyun said he had clearly communicated to the US government that the country’s semiconductor ecosystem, built over decades, cannot simply be transferred.
In Chinese, translated by CNBC, he said Taiwan’s international expansion, including investment in the United States, is based on the idea that industry will continue to take root in Taiwan and continue to expand domestic investment.
The comments are a pushback against domestic hub goals outlined by U.S. Secretary of Commerce Howard Lutnick in a CNBC interview in January, on the heels of the latest U.S.-Taiwan trade deal. Lutnick said he hopes to see 40% of Taiwan’s entire chip supply chain move to the United States during President Donald Trump’s term.
Under the agreement, the Taiwanese government pledged $250 billion in direct investment by high-tech companies, as well as $250 billion in loans to expand production capacity in the United States.
The U.S. government pledged to reduce tariffs on most goods from Taiwan from 20% to 15%, exempt generic drugs, raw materials, aircraft parts and natural resources not available domestically, and expand tariff-free export quotas for Taiwanese chips to the United States.
Taiwan Semiconductor Manufacturing Corporation, one of the world’s leading contract chipmakers and producers of cutting-edge semiconductors, is already working to better align with U.S. policy interests.
The company has spent more than $65 billion in U.S. manufacturing in recent years, with plans to expand that to $165 billion to produce chips for U.S. customers Apple and Nvidia. This investment also leverages US CHIPS and Science Act grants.
But Lutnick said Washington is also looking for hundreds of other small businesses in the chip supply chain to come to the United States.
“We’re going to build a huge semiconductor industrial park in the United States…This is a $500 billion down payment to bring semiconductors home,” he said in January, adding that Taiwan-based semiconductor companies that don’t manufacture in the United States would likely face the 100% tariffs Trump has threatened for the sector.
But semiconductor analysts largely agree with Chen’s assessment that Washington’s most ambitious plans for a domestic hub are unfeasible, citing the difficulty of relocating such a sophisticated supply chain.
Analysts and industry officials point to Taiwan’s deeply integrated semiconductor ecosystem, U.S. labor shortages and high costs as some of the key obstacles.
Geopolitical analysts also point to the so-called “Silicon Shield” theory, where the island’s important role in global chip supply makes it a strategic imperative for the United States to protect its autonomy and deter potential Chinese aggression. The Chinese government claims sovereignty over the democratically ruled island.
This silicon shield could further deter Taiwan from moving its supply chain overseas.
Taiwanese authorities already have a policy in place that requires TSMC’s overseas factories to operate using technology that is at least two generations behind the cutting-edge technology deployed in Taiwan, often referred to as the N-2 rule.
The U.S. Department of Commerce did not immediately respond to a request for comment on Chen’s remarks.
TSMC stock rose 2.75% in Taiwan on Tuesday.
—CNBC’s Matthew Chin contributed to this report.
