Taiwan should only produce half of America’s chips, says U.S. Commerce Chief

The Trump administration is pushing Taipei to shift investment and chip production to the U.S. so that half of America’s chips are manufactured domestically, in a move that could have implications for Taiwan’s national defense. 

Washington has held discussions with Taipei about the “50-50” split in semiconductor production, which would significantly reduce American dependence on Taiwan, U.S. Secretary of Commerce Howard Lutnick told News Nation in an interview released over the weekend. 

Taiwan is said to produce over 90% of the world’s advanced semiconductors, which, according to Lutnick, is cause for concern due to the island nation’s distance from the U.S. and proximity to China. 

“My objective, and this administration’s objective, is to get chip manufacturing significantly onshored — we need to make our own chips,” Lutnick said. “The idea that I pitched [Taiwan] was, let’s get to 50-50. We’re producing half, and you’re producing half.” 

Lutnick’s goal is to reach about 40% domestic semiconductor production by the end of U.S. President Donald Trump’s current term, which would take northwards of $500 billion in local investments, he said. 

Taiwan’s stronghold on chip production is thanks to Taiwan Semiconductor Manufacturing Co., the world’s largest and most advanced contract chipmaker, which handles production for American tech heavyweights like Nvidia and Apple. 

Taiwan’s critical position in global chips production is believed to have assured the island nation’s defense against direct military action from China, often referred to as the “Silicon Shield” theory.

However, in his News Nation interview, Lutnick downplayed the “Silicon Shield,” and argued that Taiwan would be safer with more balanced chip production between the U.S. and Taiwan.

“My argument to them was, well, if you have 95% [chip production], how am I going to get it to protect you? You’re going to put it on a plane? You’re going to put it on a boat?” Lutnick said. 

Under the 50-50 plan, the U.S. would still be “fundamentally reliant” on Taiwan, but would have the capacity to “do what we need to do, if we need to do it,” he added.

Beijing views the democratically governed island of Taiwan as its own territory and has vowed to reclaim it by force if necessary. Taipei’s current ruling party has rejected and pushed back against such claims. 

This year, the Chinese military has held a number of large-scale exercises off the coast of Taiwan as it tests its military capabilities. During one of China’s military drills in April, Washington reaffirmed its commitment to supporting Taiwan. 

Lutnick’s statements on the News Nation interview aligned with past comments from Trump, suggesting that the U.S. should get more in return for its defense of the island nation against China. 

Last year, then-presidential candidate Trump had said in an interview that Taiwan should pay the U.S. for defense, and accused the country of “stealing” the United States’ chip business. 

The U.S. was once a leader in the global semiconductor market, but has lost market share due to industry shifts and the emergence of Asian juggernauts like TSMC and Samsung. 

However, Washington has been working to reverse that trend across multiple administrations. 

TSMC has been building manufacturing facilities in the U.S. since 2020 and has continued to ramp up its investments in the country. It announced intentions to invest an additional $100 billion in March, bringing its total planned investment to $165 billion. 

The Trump administration recently proposed 100% tariffs on semiconductors, but said that companies investing in the U.S. would be exempt. The U.S. and Taiwan also remain in trade negotiations that are likely to impact tariff rates for Taiwanese businesses.