Taipei, Taiwan – Taiwan has informed Washington that its plan to shift 40% of the island’s semiconductor supply chain to the United States is unfeasible, according to Vice Premier Cheng Li-chiun. In a recent television interview, Cheng emphasized the importance of Taiwan’s extensive semiconductor ecosystem, noting that such a significant relocation cannot happen overnight.

Cheng’s statements come in response to U.S. Commerce Secretary Howard Lutnick’s intentions expressed earlier this year, which aimed for substantial onshoring of Taiwan’s semiconductor industry during President Donald Trump’s current term. The U.S. had outlined ambitious targets, seeking a major transition of chip manufacturing back to American soil amid rising global tensions.

Taiwan has committed to international expansion, with investments in the U.S. projected to bolster production capacity while maintaining its core operations at home. Cheng noted that while Taiwan is committed to enhancing its partnerships abroad, the foundations of its semiconductor manufacturing must remain in place domestically.

In an agreement reached earlier this year, Taiwanese authorities pledged $250 billion in investments by local tech firms to expand operations in the U.S. Additionally, Washington reduced tariffs on various goods from Taiwan and promised increased quotas for tariff-free Taiwanese chip exports. Nonetheless, the logistics of such a large-scale shift remain daunting for Taiwan’s industry.

Taiwan Semiconductor Manufacturing Company (TSMC), the world’s foremost contract chip producer, has been aligning its operations with U.S. priorities. With over $65 billion already directed toward U.S. manufacturing, plans are in place to increase this figure to $165 billion as TSMC continues to model its production to serve major American clients like Apple and Nvidia.

Lutnick, meanwhile, has expressed aspirations for an even broader reshaping of the semiconductor landscape in the U.S., aiming to create extensive industrial parks dedicated to chips. However, industry analysts caution that these goals may be overly ambitious, citing challenges such as high costs and the inherent complexities of moving sophisticated manufacturing processes.

Concerns regarding Taiwan’s geopolitical significance underpin these discussions. The island plays a crucial role in the global semiconductor supply chain, acting as a bulwark against potential Chinese aggression. Analysts point to the “Silicon Shield” theory, which highlights the strategic necessity of protecting Taiwan’s semiconductor capabilities in the context of U.S. national security.

Under existing policies, Taiwan has instituted regulations that dictate the technology used in overseas TSMC facilities, ensuring they operate with technology at least two generations behind what is used in Taiwan. This measure aims to contain the transfer of advanced semiconductor capabilities while reinforcing domestic industry.

The U.S. Commerce Department has yet to respond to Cheng’s remarks, which signal a complex interplay of economic and geopolitical factors affecting the semiconductor sector. As this dialogue continues, shares of TSMC have displayed a positive trend, reflecting investor confidence amid ongoing negotiations.