Why did Taiwan reject the US proposal to share chip production equally?

Taiwan’s government has rejected a US push for equal sharing of semiconductor manufacturing, underlining the island’s determination to defend its strategic control over global chip supply chains.

Recent talks between Taiwanese and US officials, initially aimed at resolving trade and tariff disputes, took an abrupt turn after Washington floated a proposal in late September.

U.S. Commerce Secretary Howard Lutnick publicly confirmed that reducing chip dependency was an urgent national security goal, referencing fears that clustering advanced chip capacity across the Pacific made America vulnerable to Chinese threats.

However, Taiwanese leaders quickly clarified that the idea of a 50-50 production commitment was never part of the negotiating table.

What sparked the US call for equal chip production?

The Trump administration initiated the proposal as part of a broader effort to enhance the resilience of US tech infrastructure against potential disruptions.

Washington cited recent events in Ukraine and the Middle East as proof that foreign supply dependency puts key sectors at risk.

Some US lawmakers argue that placing “95 percent of our chips 9,000 miles away” exposes the country to unacceptable geopolitical and economic dangers.

The US has already made historic investments, targeting at least 40 percent domestic chip manufacturing by 2029.

The 50-50 split plan would require hundreds of billions in new facilities and incentives, reshaping supply chains in favor of North America. Taiwanese officials, however, stated that no agreement of this scale would be accepted.

Did you know?
TSMC accounts for over 90 percent of the planet’s most advanced chip production, making its technology a pivotal asset in global electronics and AI industries.

How did Taiwan respond to the proposal and why?

Vice Premier Cheng Li-chiun stated flatly that Taiwan had neither promised nor could it accept any deal that evenly splits semiconductor output with the US.

Negotiators reiterated that chip manufacturing sovereignty is a core component of Taiwan’s national interest, vital for both security and leverage in international trade.

Opposition lawmakers in Taipei denounced the US proposal as exploitative, arguing that any commitment to dilute Taiwan’s industry leadership could threaten its economic survival.

They stressed that ceding high-end chip output would reduce Taiwan’s bargaining position in an increasingly technological world.

What impact could the split have on Taiwan’s chip industry?

A forced 50-50 distribution could undermine Taiwan’s famed “Silicon Shield,” the strategic theory that global chip reliance helps deter aggressive acts by outside powers.

Industry experts warn the move could erode the competitive advantages enjoyed by Taiwanese firms, especially TSMC, which anchors the country’s exports and innovation.

These concerns are heightened by rising tariffs on other Taiwanese products and fears that diminished chip leadership could impact local employment and investment.

For many in Taiwan, the costs of equal sharing would far outweigh the promised gains for US-Taiwan relations.

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How is TSMC’s US investment shaping negotiations?

Even as the dispute heats up, TSMC is already expanding in the US, ramping up its Arizona project to an unprecedented $165 billion as of this year.

The facilities will bring a portion of TSMC’s 2-nanometer technology stateside, but executives reaffirm that the majority of high-end production capacity will remain in Taiwan.

Taipei’s stance is that strategic expansion abroad should be voluntary, not mandated by foreign governments.

The chip giant expects only about 30 percent of its most advanced output to occur in Arizona after six planned factories are operational, reinforcing Taiwan’s global lead in process technology.

What are the broader effects on global tech supply and security?

This clash has far-reaching implications for every company and country that relies on semiconductors. As the US ramps up domestic output and Taiwan defends its central role, the possibility of fragmented supply chains could generate uncertainty for automakers, electronics producers, and defense industries worldwide.

The failed 50-50 proposal highlights tensions underlying the digital age: balancing open trade, national security prerogatives, and alliances in a time of rapid innovation.

Nations and companies may need to diversify sources and invest more for resilience, while Taiwan’s high-stakes chips remain at the heart of global technological competition.

Rather than resolving disputes, Taiwan’s rejection of the US sharing proposal sets the stage for further negotiations and the development of new strategies.

Global supply chains, statecraft, and the fate of next-generation technology will all hinge on how this rivalry is managed in the years to come.