Taiwan Rejects U.S. 40% Chip Onshoring Target as Impractical

Taiwan’s vice premier pushed back firmly against a recent U.S. objective to transfer a large share of the island’s chip production and supporting suppliers onto American soil, calling the proposal unworkable. The dispute centers on a U.S. target to relocate roughly 40% of Taiwan’s semiconductor supply network within a politically short timeframe, which collides with decades of industry concentration and technical specialization on the island. Taiwanese officials emphasize that fabs, upstream material suppliers, specialized tooling and the dense web of subcontractors are tightly integrated; replicating that ecosystem requires years of capital investment, workforce training and supplier development. Washington has sought to accelerate relocation through generous incentives and trade concessions tied to the bilateral package, but those levers face limitations from cost differentials, labor constraints in the U.S., and the practical time needed to stand up complex capacity. Major Taiwanese firms have announced sizable U.S. expansion commitments and staged fab projects, yet those investments are designed as phased buildouts rather than instant mass migration of entire value chains. Industry analysts point out that smaller tiers of the supply chain—materials, niche process suppliers and specialized equipment makers—are especially resistant to short-term relocation because of supplier clustering and scale economies. Beyond economics, Taipei’s posture reflects strategic calculations: maintaining a central role in advanced-node production preserves leverage and national economic security, reducing incentives for wholesale offshoring. The episode also echoes a wider problem confronting U.S. policy: allied coordination on technology and trade is difficult, as seen in separate frictions with partners over export controls and regulatory alignment, which add another layer of complexity to any multinational onshoring strategy. Policy tools discussed during exchanges include large investment commitments, potential tariff penalties for non-compliance, tariff-rate adjustments and targeted incentives; each carries administrative and market friction that can blunt intended effects. The standoff exposes a gap between political timelines and industrial realities, suggesting that future bargaining will likely pivot from a blunt numerical target to more granular, segment-by-segment agreements that reconcile commercial feasibility with resilience and security goals. For firms, the immediate landscape will be mixed: U.S.-destined fab projects where economics and supply exist will proceed, while many upstream and niche suppliers will remain concentrated in Asia for the foreseeable future. The outcome will shape the next phase of U.S.-Taiwan industrial coordination and inform how Washington tries to balance security objectives with the practical limits of global manufacturing networks.