U.S. Pushes Taiwan for 50% Chip Production Shift, Faces Resistance

- U.S. Commerce Secretary ties chip relocation to defense cooperation. - Taiwan's "N-1" policy safeguards advanced chip technology. The United States is escalating diplomatic and economic pressure on Taiwan to relocate a significant portion of its semiconductor production to American soil. This move is a key strategy to bolster the domestic supply chain and reduce dependency on Taiwan amidst growing geopolitical tensions with China. U.S. Commerce Secretary Howard Lutnick has underscored this initiative as critical for achieving the nation’s goal of producing 50% of its semiconductor supply domestically. On September 29, 2025, CoinDesk reported that Lutnick explicitly linked U.S. defense support for Taiwan to the island’s cooperation in relocating its semiconductor manufacturing operations. He highlighted that Taiwan's dominance in global semiconductor production poses security vulnerabilities for the U.S., particularly during geopolitical instability. Proposed measures include imposing steep tariffs and introducing a "1:1" production mandate, which would require companies to produce one chip domestically for every chip they import. Taiwan Semiconductor Manufacturing Company (TSMC), the world's top contract chipmaker, has pledged $165 billion to expand its U.S. operations. This investment will fund new fabrication plants in Arizona designed to produce advanced 4-nanometer, 3-nanometer, and 2-nanometer chips over the coming decade. However, experts caution that replicating Taiwan's cutting-edge semiconductor ecosystem on U.S. soil faces significant challenges, such as prohibitive costs and potential disruptions to the global supply chain. Meanwhile, Taiwan remains steadfast in protecting its technological dominance. Its "N-1" policy mandates that overseas semiconductor facilities must operate with technology at least one generation behind its domestic capabilities. Taiwan frames this policy as a cornerstone of its "silicon shield," a strategic deterrent against potential aggression. Recent amendments to the nation’s Industrial Innovation bill reinforce this stance by introducing strict penalties for unauthorized investments abroad that risk compromising national security. TSMC shares reflected the brewing tensions, dipping 1.5% following Lutnick’s remarks. According to Bloomberg on September 29, the company's stock was trading at $95.60 as of 12:00 UTC, with trading volume showing a 0.8% drop over the preceding 24 hours. However, investor confidence in the company remains resilient, driven by its robust year-to-date performance despite intensifying geopolitical pressures. This unfolding scenario holds far-reaching consequences for the global semiconductor landscape. While the U.S. seeks to fortify its supply chain through increased domestic production, Taiwan is equally committed to preserving its technological edge and geopolitical leverage. The outcome of these efforts will decisively shape the industry's future trajectory against a backdrop of complex geopolitical dynamics.