Taiwan Rejects U.S. Push for 50/50 Chip Split, Sparking a Fresh Semiconductor Tension

A fresh conflict is brewing in the global semiconductor industry, one that could reshape the balance of technological power and rattle already fragile supply chains. At the center of this brewing storm is Washington’s push for Taiwan — home to the world’s most critical chipmaker, TSMC — to move half of its US-bound semiconductor production onto American soil.

US Secretary of Commerce Howard Lutnick disclosed the proposal during an interview with News Nation, saying the United States would pursue a 50/50 split agreement with Taiwan. The plan would compel TSMC, the world’s largest contract chip manufacturer, to significantly increase its US-based output. While the company already has several fabrication plants under construction in Arizona, their combined capacity is still only a fraction of what TSMC produces in Taiwan.

But Taiwan’s leadership has categorically denied any such commitment. Vice Premier Cheng Li-chiun was blunt when addressing reporters: “Our negotiating team has never made any commitment to a 50/50 split on chips. Rest assured, we did not discuss this issue during this round of talks, nor would we agree to such conditions.”

The rebuff underlines the high stakes of semiconductors, which are not just a business but the backbone of modern economies and a geopolitical lifeline. Taiwan’s semiconductor dominance, anchored by TSMC’s advanced foundries, gives the island enormous strategic leverage at a time when US-China tensions are escalating. For Washington, however, the reliance on chips manufactured in a region exposed to Beijing’s pressure is a strategic vulnerability it is desperate to fix.

That urgency is reflected in America’s increasingly hardline stance. Reports last week indicated the US was weighing tariffs on American companies that fail to source an equal share of chips domestically. While TSMC’s Arizona investments would help it sidestep such penalties, the proposal signals how aggressively the Trump administration is prepared to push foreign manufacturers into building on US soil.

Tariffs have become one of Trump’s most-used levers. Over the past year, he has imposed and reshuffled duties on technology imports, aiming to punish consumers for buying non-US products and force companies to reshore production. TSMC has already felt the pressure, losing its special fast-track export privileges at the end of this year, while Trump threatened a “big tax” — possibly upwards of 100 percent — before the company broke ground on its first Arizona fab.

Despite political volatility, TSMC has made deep commitments to the US. The company is investing $100 billion into three new fabs in Arizona, and Apple has boosted its US sourcing commitment to $600 billion. But the technology gap remains glaring. TSMC’s most advanced N2 process node will go into volume production later this year in Taiwan’s Fab 20, followed quickly by the A16 and derivative nodes. By contrast, its US operations remain far behind — currently producing N4 technology, targeting N3 production in 2028, and only expected to reach N2 and A16 capabilities near the end of the decade.

That lag is critical as advanced nodes are prized for their efficiency and performance, making them the first choice for giants like Apple and AMD. The fact that Washington’s domestic fabs will trail Taiwan by several years is a vulnerability it cannot ignore.

Still, Taiwan is not budging. Premier Cho Jung-tai confirmed that “critical substantive consultations are currently underway” between Taipei and Washington, with “certain progress” reported. Yet Cheng Li-chiun’s rejection of the 50/50 split makes clear that Taiwan intends to defend its chipmaking crown.

The implications go far beyond contracts and tariffs. Analysts warn this tug-of-war could escalate into a new semiconductor conflict, with ripple effects across the global market. Chip shortages during the pandemic demonstrated how disruptions in Taiwan’s output could halt car manufacturing, delay electronics shipments, and push up prices worldwide. If Washington’s push for reshoring collides with Taiwan’s insistence on keeping its most advanced processes at home, the result could fracture global supply chains even further.

Taiwan’s chipmaking dominance has long been its geopolitical shield, a reason why the island matters so profoundly to allies and rivals alike, while reducing reliance on foreign supply has become a strategic imperative for Washington. But with both sides digging in, the world’s most vital industry may be heading into a new era of uncertainty — one where the competition over where chips are made could be just as disruptive as the fight over who makes them.