Taiwan will not agree to 50-50 chip production deal with US, negotiator says

Taiwan's top tariff negotiator, Vice Premier Cheng Li-chiun, explicitly rejected the U.S. proposal for a 50-50 split in semiconductor production, stating it was neither discussed nor agreeable, underscoring Taiwan's intent to maintain its dominant chip manufacturing position. This rejection comes amidst ongoing "detailed" and "critical" tariff talks between Taiwan and the U.S., where Taiwan seeks more favorable trade rates, even as TSMC invests $165 billion in U.S. facilities while keeping the majority of its production in Taiwan. The development signals potential friction in U.S. efforts to diversify its semiconductor supply chain despite active trade discussions.

Analysis

Taiwan has formally rejected a U.S. proposal for a 50-50 split in semiconductor production, a significant development in ongoing trade and supply chain negotiations. Vice Premier Cheng Li-chiun stated unequivocally that such terms were not discussed and would not be agreed to, reinforcing Taiwan's intention to maintain its global dominance in chip manufacturing. This stance creates friction with Washington's strategic goal of onshoring critical technology production. Simultaneously, tariff talks are at a "critical" stage, with Taiwan seeking relief from the current 20% tariff on its U.S. exports. Taiwan Semiconductor Manufacturing Company (TSMC), a key entity in these discussions, is proceeding with a substantial $165 billion investment in Arizona, yet confirms the bulk of its production will remain in Taiwan. This balancing act occurs as TSMC's business surges on strong demand for AI applications, reflected in a positive per-ticker sentiment (0.6 for TSM), which contrasts with the mildly negative overall sentiment (-0.2) driven by the geopolitical and trade policy tensions.

Key Decisions for Investors

• Investors in TSMC should monitor the U.S.-Taiwan tariff negotiations, as an unfavorable outcome could impact profitability despite the company's strong fundamentals driven by AI demand.
• The rejection of the production-split proposal confirms that the de-risking of the semiconductor supply chain away from Taiwan will be a prolonged and difficult process, meaning geographic concentration risk remains a key factor for the entire sector.
• Consider that Taiwan's firm negotiating stance, while creating short-term trade uncertainty, also reinforces TSMC's strategic indispensability and pricing power, which could be a long-term positive for the stock, albeit with a persistent geopolitical risk premium.