Taiwan Pushes Back on Idea of Shifting More Chip Production to U.S.

Taiwan’s top trade representative pushed back on the idea that the island will shift more of its chip production to the US as the tariff tug-of-war continues

Taiwan’s top trade representative has pushed back on the idea that the island will shift more of its chip production to the U.S. as the tariff tug-of-war continues.

Taiwan is facing a 20% tariff on its exports to the U.S., plus another levy on all foreign-made chips.

Taiwanese Vice Premier Cheng Li-Chiun said in a statement Wednesday that her negotiation team has not made, and will not ever make, a commitment on a 50-50 split of semiconductor production with the U.S.

That came after U.S. Secretary of Commerce Howard Lutnick said in an interview with NewsNation posted over the weekend that he had floated the proposal.

“My objective, and this administration’s objective, is to get chip manufacturing significantly onshored—we need to make our own chips,” Lutnick said.

Splitting production would diverge from the current direction of supply-chain collaboration and investment between the two sides, Cheng said after officials concluded a round of trade talks in Washington.

The U.S. Trade Representative’s Office and Commerce Department didn’t respond to requests for comment.

Taiwan is facing a 20% tariff on its exports to the U.S., plus another levy on all foreign-made chips. President Trump has said exemptions to the chip duty would be made for companies that have committed to manufacturing in America.

Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, has already pledged to invest $165 billion in U.S. chip-manufacturing plants, which Taiwanese officials have previously said exempts it from the tariff.

Given the lack of clarity on negotiations, analysts say it’s hard to interpret the latest development.

The simplistic case would be that markets might be relieved if Taiwan takes a tougher stance, potentially making Taiwanese companies’ future investments in the U.S. “more optimized and less burdensome,” said Lombard Odier senior macro strategist Homin Lee.

TSMC’s shares ended 1.5% higher on Wednesday after rising as much as 3.4% during the session.

Though TSMC has been accelerating its expansion in Arizona, aiming to create a “gigafab cluster” in the state, Arisa Liu, a researcher at think tank Taiwan Institute of Economic Research, said a 50-50 proposal would seem to signal that its investment may be insufficient for the U.S.’s chip localization goal.

The Trump administration’s goal is to have chip companies manufacture the same number of semiconductors in the U.S. as their customers import from overseas, The Wall Street Journal reported previously, citing people familiar with the matter. Companies that don’t maintain a 1:1 ratio over time would have to pay a tariff, according to the people.

Producing enough U.S.-made chips to match imports seems unrealistic, Lombard Odier’s Lee said, as doing so requires the right combination of workforce, know-how and supply chain, and would take years.

It’s a source of concern to be building fabs that are far more expensive and more difficult to run, he said. “You have to export everything from Taiwan. You have to send the engineers from Taiwan to the U.S. All these things are more expensive.”

Asking Taiwan to shift more of production to the U.S. could be a negotiating tool, Lee said, adding that Taipei might need to make “some grand gesture,” such as doubling down investment in the Arizona gigafab, to get some reprieve on tariffs.

The move could have broader implications for the industry too, said Liu at TIER.

If a 50-50 division is implemented, that would be the end of an efficient, but centralized global model of chip-making, ushering in a high-cost but resilient decentralized model, she said.

Write to Sherry Qin at sherry.qin@wsj.com