Taiwan’s top tariff negotiator has firmly rejected a U.S. proposal for an equal split in global semiconductor production, signaling potential friction in ongoing trade talks between the two allies. Vice Premier Cheng Li-chiun, upon returning from discussions in Washington, stated that no such 50-50 arrangement was even broached during the negotiations, underscoring Taiwan’s reluctance to cede control over its dominant position in chip manufacturing.

The proposal, floated by U.S. Commerce Secretary Howard Lutnick in a weekend interview with News Nation, aimed to relocate half of all semiconductor output to American soil. This comes amid escalating concerns in Washington about supply-chain vulnerabilities, particularly given Taiwan’s outsized role in producing advanced chips critical for everything from smartphones to artificial intelligence systems.

U.S. Push for Semiconductor Security

Lutnick’s pitch reflects broader U.S. efforts to onshore production, driven by geopolitical tensions with China and the strategic importance of chips. Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s leading contract chipmaker, currently produces the vast majority of cutting-edge semiconductors on the island, making it a linchpin in global tech supply chains. According to reports from Yahoo Finance, Cheng emphasized that Taiwan had “never made any commitment” to such a deal, highlighting the island’s determination to maintain its technological edge.

Industry analysts note that a 50-50 split would require massive investments and could disrupt TSMC’s efficient operations. The company has already committed billions to U.S. facilities, including a $12 billion plant in Arizona, but shifting half of production would entail enormous costs and logistical challenges, potentially raising prices for chip-dependent industries worldwide.

Taiwan’s Strategic Calculus

Taiwan’s stance is rooted in economic self-interest and national security. The semiconductor sector accounts for a significant portion of the island’s GDP, with TSMC alone employing tens of thousands and driving innovation. As detailed in a Reuters article, negotiators like Cheng are navigating U.S. tariff pressures while protecting Taiwan’s core industries from being diluted.

Moreover, the rejection aligns with Taiwan’s broader diversification strategy. TSMC has been expanding globally, including partnerships and new fabs in Japan and Germany, to mitigate risks from cross-strait tensions. Yet, forcing a parity deal could strain relations, especially as the U.S. seeks to counter China’s growing semiconductor ambitions through initiatives like the CHIPS Act.

Implications for Global Chip Supply

For U.S. firms like Nvidia, which rely heavily on TSMC for advanced AI chips, this rebuff could complicate supply assurances. Recent reports from Yahoo Finance indicate discussions of joint ventures between TSMC and Intel, potentially offering alternative pathways to boost American production without mandating a strict split.

Insiders suggest that while the 50-50 idea may be off the table, compromise could emerge in areas like technology sharing or subsidies. However, Taiwan’s firm line, as echoed in analyses from Digitimes, warns of five major pressures on TSMC, including rising costs and geopolitical risks that could ripple through the industry.

Future Negotiations and Industry Shifts

Looking ahead, the impasse may accelerate U.S. efforts to build domestic capabilities, possibly through incentives for companies like Intel or Samsung. Taiwan, meanwhile, is likely to leverage its expertise in negotiations, ensuring that any deal preserves its innovation hub status.

Ultimately, this episode highlights the delicate balance in U.S.-Taiwan relations, where economic interdependence meets strategic imperatives. As trade talks continue, stakeholders will watch closely for signs of escalation or resolution, with the global tech ecosystem hanging in the balance.