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Taiwan Must Help US to Make Half its Chips, Commerce Chief Says

(Bloomberg) -- Washington is demanding Taiwan move investment and chip production to the US so half of American demand is manufactured locally, outlining a radical shift for the global semiconductor industry.

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The US has held discussions about that with Taipei to reduce the risks of over-reliance, Commerce Secretary Howard Lutnick said in an interview with NewsNation. It was the only way to effectively counter Beijing’s threats to invade a self-ruled island it views as its own, Lutnick argued.

“That’s been the conversation we had with Taiwan, that you have to understand it’s vital for you to have us produce 50%,” he said. The US aims to get to “maybe 50% market share of producing the chip and the wafers — the semiconductors — we need for American consumption. That’s our objective,” Lutnick said during the interview.

US officials have for years warned about an over-dependence on Taiwan Semiconductor Manufacturing Co. and its giant ecosystem of suppliers, which together make and supply the vast majority of the world’s most advanced chips. That risk emerged particularly during Covid-era shortages that highlighted how semiconductors fueled industries from car-making to military technology and AI.

TSMC, the main chipmaker to Apple Inc. and Nvidia Corp., is one of the centerpieces of a US government effort to entice manufacturing back home.

It’s pledged to invest $165 billion to ramp up production at its US sites. But shifting capacity en masse will require not just enormous capital but also the large-scale migration of scores of suppliers and partners that together comprise TSMC’s production chain.

The Wall Street Journal reported last week that Washington was weighing a broad plan to reduce its reliance on overseas semiconductors, saying companies must produce as many chips in America as they import from other sources or face additional tariffs. Lutnick didn’t elaborate in the NewsNation interview about how the US would convince Taipei to get behind his objective.

“We’re still fundamentally reliant upon you because we can’t live without the other half,” Lutnick said. “It will shock everybody how successful we are.”