Taiwan rejects '50-50' chip split with US

Taiwanese trade officials have rejected a proposal to evenly split semiconductor production capacity—“50-50”—between Taiwan and the United States.

US Secretary of Commerce Howard Lutnick floated the idea in an interview with the US media outlet "NewsNation." Taiwanese trade representatives clarified that such a proposal has not been part of any official negotiations and said Taiwan will not accept such terms.

During the interview, Lutnick was asked about the so-called “Silicon Shield”—a term that refers to Taiwan’s dominance in global semiconductor manufacturing, particularly through TSMC, which many believe acts as a strategic deterrent against military aggression. The idea suggests that Taiwan’s central role in the chip supply chain gives democratic allies strong incentives to help defend the island.

Lutnick argued that if Taiwan retains too much of the world’s chip production capacity, it could undermine US efforts to protect the island. “My argument to them (Taiwan) was, well, if you have 95%, how am I going to get it to protect you?” Lutnick said.

He continued, “We need enough production. So the idea that I pitched them (Taiwan) was, let’s get to 50-50.”

Taiwanese representatives pushed back on this logic, emphasizing that Taiwan’s semiconductor strength should be seen as a global asset—not a bargaining chip—and warned against politicizing industrial capacity.

TSMC Arizona Corporation. (TSMC)

Taiwan Pushes back on 50-50 proposal 

In response to a proposal from US Secretary of Commerce Howard Lutnick suggesting that Taiwan split semiconductor production capacity “50-50” with the United States, Taiwan’s Deputy Premier Cheng Li-chun (鄭麗君) publicly dismissed the idea.

Speaking to the media at Taoyuan International Airport on October 1 after returning from the US, Cheng—who also heads Taiwan’s negotiation team for US-Taiwan tariff talks—said:
“This is the US side’s idea. Our negotiation team has never made any commitment to a 50-50 chip capacity split. Please rest assured. We did not discuss this issue during the talks, and we will not agree to such terms.”

Despite floating the proposal, Lutnick acknowledged that interdependence would persist even with a split. He stated, “We're producing half and you're producing half. We're still fundamentally reliant upon you because you know we can't live without the other half.”

Scholars Question Feasibility and Motives

Professor Huang Kwei-Bo (黃奎博) of the Department of Diplomacy at National Chengchi University told TCN that there is a “noticeable gap between how we’ve described the situation and how the US has portrayed it.”

“But judging from how the Trump administration typically operates, the US version seems more plausible,” he said. “That is, the US would definitely have brought it up—if they hadn’t, that would be out of character for Trump.”

Huang suggested, “We might boldly hypothesize that the US did bring it up, but we (Taiwan’s negotiation team) perhaps felt the deal was just too big to accept, and have been reluctant to agree to it.”

He added, “Right now, it seems that the DPP government is unwilling to accept a 50–50 deal, but as for how much they’re willing to concede—we wouldn’t dare speculate.”

Professor Tso Cheng-Tung (左正東) of the Department of Political Science at National Taiwan University also weighed in, saying:
“Negotiation is a lengthy process. Of course, we hope the government can hold its bottom line while also respecting the business sector’s freedom to manage their operations.”

Tso emphasized the importance of corporate autonomy:
“If a company’s board doesn’t approve a particular investment, the government shouldn’t force it. That principle must be upheld.”

Regarding the logistics of splitting production, Tso added:
“Production capacity cannot simply be divided and allocated at will, because after industrial investments are made, other conditions must also be met.”

He explained that transferring chip production comes with serious challenges:
“Semiconductor manufacturing depends on a highly skilled and stable workforce to handle long hours and other demanding conditions. If these issues can’t be addressed, production capacity simply can’t be moved.”

Silicon Shield is Vital to Taiwan’s Survival

The concept of a “Silicon Shield” was coined by Australian journalist Craig Addison in a 2000 New York Times op-ed titled “A 'Silicon Shield' Protects Taiwan From China.”

He argued that Taiwan’s dominance in semiconductor production could deter Chinese aggression, as any military action would risk collapsing global tech supply chains.
Addison wrote that “military aggression by China against Taiwan would cut off a large portion of the world's supply of these products,” and the global digital economy “would be threatened with disruption.”

He added, “China will have to think long and hard before taking any military action to disrupt or destroy Taiwan's economy.”

Though the US has not explicitly promised to defend Taiwan militarily, its reliance on Taiwan’s chip industry makes it a strategic interest. Addison noted that “any US moves to protect its supply of information technology products from Chinese aggression would have some parallels to the Gulf War.”

Professor Huang echoed the importance of maintaining this strategic advantage.
“In theory, the silicon shield should be as thick and strong as possible,” he said.

“When Taiwan’s silicon shield becomes thinner, Taiwan becomes relatively less secure. If the US also fails to provide sufficient guarantees, that means Taiwan faces insecurity on top of insecurity.”

Huang warned that weakening the shield could erode Taiwan’s competitiveness and security.
“In the long run, a thinner silicon shield would mean that Taiwan’s semiconductor industry—both upstream and downstream—might have to relocate to the United States. This could lead to, first, a loss of talent, expertise, and capital; second, a decline in Taiwan’s overall income and economy, including GDP; and third, since Taiwan has already pledged to significantly increase defense spending, the combination of shrinking revenues and rising expenditures could weaken the island’s fiscal stability and competitiveness over time—ultimately affecting its national security.”

The Silicon Shield vital for Taiwan's survival

Taiwan’s government should consider several strategic approaches in future negotiations with the US over the “Silicon Shield,” Professor Tso Cheng-Tung (左正東) said:

“First, beyond holding firm to its bottom line, the government should shape US expectations by clearly communicating Taiwan’s position. This is a realistic and achievable approach.

Second, the government should develop alternative ways to foster win-win outcomes in US–Taiwan relations, including industrial cooperation or reciprocal market access. Taiwanese products are highly competitive, and rather than imposing investment requirements, promoting open markets would offer a relatively fair solution.

Third, the current proposal to establish a science park model in the United States through Taiwan–US cooperation could also be worth exploring. If such an industrial park were developed—one that clusters Taiwan’s semiconductor companies in a specific area without undermining their business autonomy—it could serve as a practical and strategic option.”

It is necessary for the Taiwan government to carefully craft a plan for trade-offs.

Professor Huang Kwei-Bo (黃奎博) emphasized: “Taiwan should approach negotiations with caution — trading conditions for conditions — to secure an outcome where the island gains something in return for what it conceded.”

The United States' proposal for a 50-50 semiconductor production split has exposed a gap between Washington's security demands and Taipei's economic interests. Taiwan's rejection seems to be a temporary pause in the lengthy negotiations.

The Taiwanese government must now cautiously and strategically craft a plan for trade-offs, aiming to secure mutually beneficial industrial cooperation and market access rather than simply conceding to US demands.