Brian Hioeby Brian Hioe
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Photo Credit: Arusanov/WikiCommons/Public Domain
US COMMERCE SECRETARY Howard Lutnick recently stated that the US would seek 50-50 production of semiconductors between Taiwan and the US, as well as that this was central to US-Taiwan cooperation. Such a proposal, however, is not likely to be well-received in Taiwan, and it is likely to be a pitfall for future relations between the US and Taiwan, encouraging further distrust in the US.
Lutnick claimed that the Trump administration’s policies toward Taiwan were guided by this proposal, as well as that this had already been expressed to Taiwan. Such statements by Lutnick take place as Taiwan approaches key trade negotiations with the US over tariffs, as part of which Vice Premier Cheng Li-chiun has traveled to America. Cheng denies that any such agreement has been made with the US and stated that Taiwan will not agree to it.
Still, this statement by Lutnick is likely to be a stumbling block for such negotiations domestically, with KMT politicians having suggested in the past that Taiwan should seek to block investment in the US by Taiwanese companies such as TSMC and UMC in retaliation for US tariffs imposed on Taiwan, as well as that Taiwan should pursue retaliatory tariffs against the US.
It is unclear to what extent Lutnick’s comments genuinely reflect Trump administration policy, or whether this is an individual initiative of Lutnick’s, though, again, Lutnick claimed that this would be US policy going forward. It is well-known in Taiwan that Trump has himself hit out against Taiwan’s dominance in the field of semiconductors in the past, with the accusation that Taiwan stole the US semiconductor industry. Taiwan currently produces over 90% of advanced chips and over 60% of global supply.
Ironically, Lutnick framed the expansion as in line with the Silicon Shield, the argument that the world’s reliance on Taiwan for semiconductors incentivizes countries to defend Taiwan and dissuades China from attacking because of its own reliance on Taiwanese semiconductors. Lutnick, while acknowledging that it would be hard to convince Taiwan to sign the idea, framed it as in line with the Silicon Shield. Lutnick stated that this was because Taiwan’s contributions to the US semiconductor supply were important to the Silicon Shield.
There is, in fact, an argument to be made that stronger trade ties may incentivize the US to defend Taiwan. TSMC’s ongoing 100 billion USD investment in the US, as one of the largest foreign investments in American history, occurred because of pressure from the Trump administration that Taiwan should seek to invest in the US’s semiconductor industry.
But Taiwan is not likely to be persuaded by this argument. Indeed, the KMT has framed TSMC’s investment in the US and the construction of its Arizona fab as the US hollowing out the Silicon Shield in a way that will lead to abandonment. Comments by Trump administration officials, such as Under Secretary of Defense for Policy Elbridge Colby, that the US should bomb TSMC in wartime to prevent it from falling into Chinese hands have not helped matters.
Indeed, if Trump picks up on Lutnick’s proposal and begins to make this a refrain of his comments about Taiwan, this could prove dangerous for the Lai administration. The Lai administration has consistently tried to fight against the spread of “US-skeptic views” in Taiwan, but the Trump administration’s undercutting of Taiwan on this and many other fronts has made this difficult.
Either way, the proposal is unlikely to take place. By the end of its second term, there is little way for the US semiconductor industry to be built up to the scale where 50% of production takes place in Taiwan and 50% in the US. It is noteworthy that the Trump administration often does not seem to understand that the semiconductor industry cannot simply be packed up and redistributed at will between the US and Taiwan, as construction of fabs is expensive, time-consuming, and laborious. As seen with the stumbles of the TSMC plant, in terms of accommodating American workers to Taiwan’s brutal work culture, building a functioning fab is easier said than done. It may not be hard for Taiwan to take measures intended to persuade the Trump administration that it is seeking to comply with its demands, but instead aiming to drag out and prolong the matter, even if it is probable that the KMT will use the Trump administration’s statements to attack the DPP.