Taiwan Calls America's 40% Chip Relocation Plan 'Impossible

America wants 40% of Taiwan's semiconductor production moved to US soil. Taiwan's response? "Impossible."

Vice Premier Cheng Li-chiun didn't mince words during a Sunday television interview. The island's decades-old semiconductor ecosystem, she said, simply cannot be relocated on Washington's timeline.

It's a direct pushback against Commerce Secretary Howard Lutnick's ambitious onshoring targets announced in January.

The $500 Billion Carrot-and-Stick

Here's what America offered: $250 billion in direct investments from Taiwanese tech companies, plus another $250 billion in credit to expand US production capacity. In return? Higher quotas for tariff-free chip exports to America.

The stick? Companies that don't build stateside face 100% tariffs.

TSMC, the world's leading contract chipmaker, is already playing ball. The company has committed over $65 billion to US manufacturing, with plans to expand that to $165 billion. They're producing chips for American giants like Apple and Nvidia.

But even TSMC's massive investment represents just a fraction of Taiwan's total semiconductor capacity.

Why 'Impossible' Makes Sense

Semiconductor analysts agree with Taiwan's assessment. Three major obstacles stand in the way:

The ecosystem problem: Taiwan's chip industry isn't just about manufacturing. It's a deeply integrated network spanning design, production, packaging, and testing. Moving 40% would be like relocating Silicon Valley – technically possible, practically absurd.

The talent gap: America faces severe shortages in semiconductor expertise. Taiwan has spent decades building this workforce. You can't simply airlift that knowledge base.

The cost reality: US manufacturing costs significantly exceed Taiwan's, even with government subsidies.

The Silicon Shield Strategy

There's another factor at play: the "Silicon Shield" theory. Taiwan's central role in global chip supply makes its protection a US strategic imperative, theoretically deterring Chinese aggression.

Why would Taiwan weaken this shield?

The island already implements an N-2 rule – overseas plants must use technology at least two generations behind Taiwan's cutting-edge production. The message is clear: the most advanced chips stay home.

What's Actually Happening

Despite the rhetoric, progress continues. Under the latest trade agreement, the US will lower tariffs on most Taiwanese goods from 20% to 15%, while waiving duties on generic drugs and aircraft components.

TSMC shares jumped 2.75% in Tuesday trading, suggesting investors aren't overly concerned about the diplomatic friction.