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Trump administration officials are pushing Taiwan to relocate semiconductor production so that 50% of U.S. chip demand is met domestically. Commerce Secretary Howard Lutnick has been leading the charge, telling Taiwanese counterparts the shift is essential for American supply-chain security, Lutnick said in a television interview this past weekend.
The demand springs from long-standing concerns about over-reliance on Taiwan Semiconductor Manufacturing Company (known as TSMC $TSM) and its vast ecosystem of suppliers and components providers — a concentration seen as especially risky given China’s perceived claims to Taiwan.
While a concern of previous administrations, the rhetoric has hardened under President Donald Trump, with the White House threatening steep tariffs on imported chips and considering a “1:1” production rule requiring companies to manufacture domestically as many chips as they import.
In March of 2025, Trump struck a deal with TSMC to invest a purported $100 billion in U.S. chip plants, including plants and packaging facilities, with promises that these investments would shield Taiwan from punitive tariffs. This builds on TSMC’s earlier purported $65 billion U.S. commitment.
The challenges are immense, however, with Bloomberg calling it “a radical shift for the global semiconductor industry.” Transplanting a dense, highly contingent and interlinked supply chain to the U.S. involves persuading dozens and dozens of component and materials suppliers to relocate, not just the fabrication facilities themselves. As industry experts acknowledge, semiconductors are among the most complicated supply chains on earth.
“Matching capacity of domestic chips with imports is a taller order than simply increasing domestic investments because overseas products are often cheaper, supply chains are difficult to tweak, and increasing U.S. supply takes time,” the Wall Street Journal reported last week.
By the same token, any tariffs or “1:1” mandates risk spooking global tech firms or triggering retaliation from China.
The U.S., at present, produces less than 10% of the global chip supply, and an even smaller percentage of the most advanced chips. Meanwhile, TSMC spent about $30 billion on capital projects in 2024 and expects to spend around $40 billion this year — which means that Washington’s reported $165 billion in U.S. build-outs would consume about five full years' worth of the company’s total global capital expenditure. And that would be aside from funding expansion in other markets and investing in next-generation process technologies, products, and packaging.
Even spread over a decade, it would require devoting a double-digit share of TSMC’s entire capital budget to the U.S. every year, an improbable concentration for a company whose competitive advantage largely depends on its incredibly finely-tuned global supply chain.
Perhaps unsurprisingly, Taiwan has pushed back publicly on the administration’s demands. Its officials argue that no single country can fully control the semiconductor chain, given its complexity and specialization. But with Trump and his cabinet aggressively wielding trade tools and applying other forms of strategic pressure, Taiwan faces a difficult path forward. It can go along with U.S. demands and risk weakening its “silicon shield,” or keep pushing back and potentially endure continued economic coercion.
