Taiwan just drew a bright red line around the heart of its economy.
After U.S. officials floated the idea of relocating 40% of Taiwan’s semiconductor capacity to American soil, Taiwan’s Vice Premier Cheng Li-chiun rejected the premise outright in a televised interview: it’s “impossible.”
This isn’t diplomatic hedging. It’s Taiwan saying: we can cooperate, we can invest, we can expand abroad—but don’t confuse that with moving the engine room.
Why Taiwan says “no” isn’t just politics — it’s physics
Chipmaking isn’t a factory you pack into shipping containers.
Taiwan’s semiconductor dominance is an ecosystem built over decades: clustered suppliers, specialized talent, precision logistics, and the know-how that comes from thousands of tiny, boring, irreplaceable routines done perfectly every day. Cheng’s point is that this “silicon ecosystem” can’t simply be uprooted without breaking the thing you’re trying to copy.
The U.S. can build fabs. It’s already doing it. But replicating the whole living network that makes Taiwan’s output fast, consistent, and scalable is a different beast.
The U.S. argument: national security + “bring it home”
From Washington’s side, the push is framed as security: reduce reliance on a single geographic chokepoint for leading-edge chips, and rebuild domestic manufacturing capacity.
In the same swirl of comments, U.S. Commerce Secretary Howard Lutnick has been linked to a blunt target—aiming for a 40% U.S. share of leading-edge chip manufacturing—and has suggested the U.S. could use tariffs as leverage if the shift doesn’t happen.
That’s the new reality of chips: they’re no longer “just trade.” They’re treated like oil—strategic, sensitive, and political.
Taiwan’s counter-offer: we’ll expand in the U.S., but the core stays here
Taiwan’s response is basically: we’ll help you build your ecosystem, but don’t expect us to hollow out ours.
Cheng emphasized Taiwan is open to expanding its presence in the United States, while insisting Taiwan’s domestic semiconductor capacity will keep growing and its most advanced capabilities remain anchored at home.
This is also where the nuance matters: Taiwan isn’t saying “no” to overseas manufacturing. It’s saying “no” to a quota-style relocation that would structurally weaken the island’s industrial base.
The elephant in the room: TSMC’s U.S. buildout is real — but it’s not “the transfer”
Here’s what makes this story combustible: Taiwanese firms are already investing heavily in the U.S.
TSMC’s Arizona expansion has been framed as an enormous long-term project—reporting has cited $165 billion in planned investment—yet Taiwan’s position is that overseas growth does not equal surrendering the center of gravity.
In other words: the U.S. is getting some capacity. Taiwan is refusing to become a branch office of its own industry.
What this fight is really about: control of the “chokepoint”
The 40% demand is more than a number. It’s a signal of intent:
- The U.S. wants a strategic buffer: chips made onshore, under U.S. jurisdiction, insulated from crisis.
- Taiwan wants to keep its most powerful leverage: the industrial cluster that makes it indispensable.
And there’s a third layer nobody says out loud: Taiwan’s chip dominance functions as a geopolitical deterrent in itself—an anchor that ties global economic stability to Taiwan’s security. Pull too much of that anchor out, and the strategic equation shifts.
Bottom line
Taiwan didn’t just reject a policy idea. It rejected a worldview: the notion that you can “reallocate” the world’s most complex manufacturing ecosystem like it’s a supply contract.
The message from Taipei is clear:
Partnership? Yes. Expansion? Sure. But a forced 40% migration? Not happening.
