Taiwan Declines US Demand To Offshore Chip Production

The threat of losing military protection did not persuade Taiwan to move half its chip manufacturing to the United States. Top trade negotiator and vice Premier Cheng Li-chiun stated that the 50-50 proposal would not be considered or even discussed. Instead, Taiwan plans to focus on lowering US-imposed tariffs that now stand at 20%.

Commerce Secretary Howard Lutnick believes that Taiwan’s chip production would be safer on US soil. The US relies on Taiwan for an astounding 95% of chip production and cannot lose this strategic trade. “My objective, and this administration’s objective, is to get chip manufacturing significantly onshored — we need to make our own chips,” Lutnick said. “The idea that I pitched [Taiwan] was, let’s get to 50-50. We’re producing half, and you’re producing half.”

There is a belief that the “Silicon Shield” deters Chinese military aggression as the island has global dominance over semiconductor manufacturing. It is true that semiconductor production is the best, if not only, leverage the nation holds.

China accused Taiwan of “selling out” to US influence, repeatedly reminding the nation that they are a province and not a sovereign country. Separatist ambitions are impossible without US military backing. Yet, now there is a concern that the nation would be surrendering its key economic component to the US. Both China and the US want to corner Taiwan and one will win.

Eric Chu, leader of Kuomintang opposition party, is less keen to cave to US demands than President Tsai Ing-wen. “No one can sell out Taiwan or TSMC, and no one can undermine Taiwan’s silicon shield,” Chu said, in reference to Taiwan Semiconductor Manufacturing Company (TSMC).

Manufacturing on US soil is far more costly and there is a concern that this could slow innovation and create new logistical issues. Yet, China has been ramping up One China policy rhetoric. President Xi Jinping called on the nation to “firmly oppose Taiwan independence separatist activities and external interference,” reaffirming China’s commitment to defend its “sovereignty and territorial integrity.”

UN General Assembly Resolution 2758 established the “one-China principle” that states Taiwan is a Chinese province under international law. The majority of UN member states agree and Taiwan has been blocked from participating in international organizations. The resolution, however, is vague and does not explicitly mention Taiwan. Rather, it “expels forthwith the representatives of Chiang Kai-shek from the place which they unlawfully occupy in the United Nations and in all the organizations related to it.” Chiang Kai-shek was the leader of the communist Republic of China (ROC) who was forced to retreat to Taiwan in 1949 after losing the Chinese civil war. Chiang Kai-shek ran Taiwan as an independent nation to the dismay of the international community. The UN officially recognized the People’s Republic of China over the ROC in 1971 and has not changed its stance.

Governments are increasingly undermining globalist organizations like the UN and ignoring past treaties. This matter cannot be solved with pen and paper.