• U.S. Commerce Secretary Howard Lutnick proposed a 50-50 semiconductor production split between the U.S. and Taiwan, which Taiwan firmly rejected.
  • Taiwan's Vice Premier Cheng Li-chiun stated the matter was "never discussed" and Taiwan would not accept such conditions.
  • The U.S. is reportedly nearing a trade deal with Taiwan that would reduce tariffs on its exports and commit TSMC (TSM) to make significantly more investment in the U.S.

Efforts to restructure the global semiconductor supply chain have hit a snag, as Taiwan pushes back against a U.S. proposal that would dramatically shift manufacturing dynamics. According to people familiar with the matter, Commerce Secretary Howard Lutnick floated a plan in a recent CNBC interview that would see $250 billion invested by Taiwanese companies and another $250 billion from the government to expand U.S. semiconductor manufacturing. But without a deal, tensions over chip production could escalate, impacting everything from consumer electronics to national security.

Taiwan's response was swift and unequivocal. Vice Premier Cheng Li-chiun clarified that such a split was "never discussed" and emphasized that Taiwan would not accept these conditions, highlighting the island's strategic leverage. This comes as Taiwan produces roughly 60% of global semiconductor production and about 90% of advanced chip output, making it a linchpin in supply chains. Attempts to reach Lutnick's office for further comment were unsuccessful, but sources indicate that U.S. trade officials have been directed to negotiate agreements with foreign semiconductor producers and report progress within 90 days.

In the background, TSMC has already committed $165 billion to build advanced-node chip factories in Arizona, with one source mentioning an agreement for $100 billion in additional manufacturing plants. These figures, while substantial, fall short of the $250 billion per side outlined in Lutnick's proposal, suggesting a gap between current investments and U.S. ambitions. Market watchers note that real-time data shows semiconductor stocks fluctuating amid the uncertainty, with investors weighing the implications of a potential trade deal that could reduce tariffs on Taiwanese exports.

Industry insiders point to the regulatory stability and competitive landscape as key factors. "It's a great country to invest here because there are a lot of very good companies and the market here is not as competitive as other markets," one executive noted, echoing sentiments from private equity circles. The U.S. push aligns with broader efforts to onshore critical technologies, but Taiwan's resistance underscores the delicate balance in these high-stakes negotiations. As talks continue, the focus remains on whether a compromise can be reached before filing deadlines loom, potentially forcing a reassessment of investment strategies.

Correction: An earlier version of this article misstated the total investment figures; they are part of a proposal and not yet finalized.