Taiwan rejects US calls to relocate 40% of its semiconductor capacity, highlighting limits of reshoring amid security concerns and global supply-chain realities.
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| As the US seeks 40% of leading-edge chipmaking at home, Taiwan warns that moving capacity at scale is “impossible,” setting up a strategic standoff. Image: CH |
TAIPEI, Taiwan — February 9, 2026:
Taiwan has drawn a clear red line in its semiconductor relationship with the United States, underscoring the widening gap between Washington’s strategic ambitions and the industrial realities that underpin global chipmaking.
Vice Premier Cheng Li-chiun’s declaration that it would be “impossible” to relocate 40% of Taiwan’s semiconductor manufacturing capacity to the US amounts to more than a negotiating rebuttal. It is a defense of an ecosystem painstakingly built over decades—one that relies on dense supplier networks, specialized talent, and a scale of coordination that cannot be rapidly replicated abroad.
From Taipei’s vantage point, semiconductors are not merely an export sector but the backbone of economic competitiveness and strategic relevance. Cheng’s insistence that Taiwan’s overall capacity will continue to grow at home reflects concern that large-scale offshoring could erode the clustering advantages that keep the island at the center of advanced manufacturing. Overseas investment, she stressed, must be additive—expanding Taiwan’s global footprint without weakening its domestic base.
Washington’s pressure is rooted in security logic. US Commerce Secretary Howard Lutnick has framed reshoring as a strategic necessity, arguing that it is untenable for advanced chip production to remain concentrated so close to China. The administration’s goal of securing 40% of leading-edge manufacturing capacity by the end of its term signals impatience with incremental diversification and a desire for measurable control over critical supply chains.
Yet the feasibility of that target remains in question. Semiconductor fabs require enormous capital, long construction timelines, and a mature ecosystem of suppliers and engineers. While Taiwan Semiconductor Manufacturing Company’s $165 billion investment in Arizona represents a historic expansion of US capacity, it also illustrates the limits of speed and scale. Replicating Taiwan’s science-park model is a generational project, not a single political cycle’s achievement.
Tariffs have emerged as Washington’s primary leverage. The recent agreement lowering tariffs on Taiwanese exports to 15% temporarily eased tensions, but Lutnick’s warnings of potential tariff hikes—up to 100% if relocation goals are unmet—raise the risk of turning strategic partnership into economic coercion. Such pressure could strain trust with a key US partner at a moment of heightened regional uncertainty.
Taiwan’s response suggests a calibrated strategy: firm resistance to structural relocation, paired with openness to cooperation. Cheng’s offer to share Taiwan’s experience in building semiconductor clusters, rather than moving them wholesale, points to a model of collaboration that prioritizes resilience over redistribution.
The standoff highlights a broader dilemma in the global tech order. As the US pushes to onshore critical technologies, allies like Taiwan must balance support for American security goals with the imperative to protect their own industrial foundations. Whether Washington can meaningfully rebuild chip power without hollowing out the world’s most sophisticated semiconductor hub may determine not only the future of US–Taiwan ties, but the shape of the global technology landscape itself.