Taiwan Rejects U.S. Proposal to Shift 40% of Chip Supply Chain

Vice Premier Cheng Li-chiun says Taiwan's semiconductor ecosystem cannot be easily relocated.

Published on Feb. 9, 2026

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Taiwan has told the U.S. government that its proposal to move 40% of Taiwan's semiconductor supply chain to the U.S. is "impossible" to execute, according to Vice Premier Cheng Li-chiun. Cheng said Taiwan's chip ecosystem, built up over decades, cannot simply be relocated. This pushes back against onshoring targets outlined by U.S. Commerce Secretary Howard Lutnick, who had suggested Taiwanese companies that don't build in the U.S. could face a 100% tariff.

Why it matters

Taiwan's semiconductor industry is a critical part of the global supply chain, with Taiwan Semiconductor Manufacturing Co. (TSMC) being the world's leading contract chipmaker. The U.S. has been pushing to onshore more chip production, but Taiwan argues its deeply integrated ecosystem makes it difficult to relocate. This highlights the geopolitical tensions around semiconductor supply chains.

The details

Under a recent U.S.-Taiwan trade agreement, Taiwanese companies promised $250 billion in direct investments and an additional $250 billion in credit to expand production capacity in the U.S. In return, they were promised higher quotas for tariff-free chip exports. However, Taiwan says its semiconductor ecosystem, built up over decades, cannot simply be relocated. Analysts cite Taiwan's integrated supply chain, U.S. labor shortages, and elevated costs as obstacles to the U.S. onshoring plans.

  • On February 10, 2026, Taiwan's Vice Premier Cheng Li-chiun made the comments rejecting the U.S. proposal in a local television interview.

The players

Cheng Li-chiun

Taiwan's Vice Premier and top tariff trade negotiator.

Howard Lutnick

U.S. Commerce Secretary who outlined onshoring targets for Taiwanese chip companies.

Taiwan Semiconductor Manufacturing Co. (TSMC)

The world's leading contract chipmaker and producer of the most advanced semiconductors.

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What they’re saying

“We must not let individuals continue to damage private property in San Francisco.”

— Robert Jenkins, San Francisco resident (San Francisco Chronicle)

The takeaway

This dispute highlights the challenges the U.S. faces in trying to onshore more of the global semiconductor supply chain, which is heavily concentrated in Taiwan. Taiwan's deeply integrated chip ecosystem and geopolitical considerations make it difficult to simply relocate production, even with financial incentives.