Taiwan stands firm on keeping next-generation chip production at home

Friday 12 December 2025 - 14:20

By: Dakir Madiha

Taiwan stands firm on keeping next-generation chip production at home

Taiwan has reiterated its determination to keep the most advanced semiconductor production within its borders, rejecting mounting calls from the United States to relocate part of its top-tier manufacturing abroad. Officials in Taipei argue that maintaining chip production domestically is essential to preserving the island’s technological edge and its vital role in the global supply chain.

Deputy Foreign Minister Francois Wu stated this week that Taiwan would continue to house its most sophisticated chip fabrication processes to ensure the island remains indispensable to the world’s semiconductor ecosystem. As a cornerstone of the global chip industry, Taiwan produces more than half of all semiconductors and dominates the highest-grade production used in smartphones, artificial intelligence systems, and supercomputing.

U.S. proposal rebuffed

The announcement follows Washington’s proposal to divide advanced chip manufacturing between the United States and Taiwan. Taiwan's government swiftly rejected the idea, with Vice Premier Cheng Li-chiun clarifying that no agreement or commitment had ever been made on such a split.

While Taiwan Semiconductor Manufacturing Company (TSMC) has invested heavily in U.S. facilities, including a $165 billion project in Arizona, these sites operate at a lower technology level than those in Taiwan. The U.S. fabs currently produce 4-nanometer chips, with gradual plans to reach 3nm by 2028 and 2nm by 2029. Meanwhile, Taiwan’s most advanced A16 chips, roughly equivalent to 1.6 nanometers, will continue to be produced exclusively on the island through the end of the decade.

Strategic reasoning

According to Wu, replicating Taiwan’s precision manufacturing environment abroad faces serious constraints. The success of its semiconductor industry, he explained, is rooted in a unique local culture and expertise that cannot easily be duplicated elsewhere. He also insisted that safeguarding the global chip supply chain depends more on preventing conflict than dispersing production.

Taiwan’s overwhelming dominance in chip production has become a form of deterrence often referred to as its “silicon shield” by making the island essential to both Chinese and Western economies. Despite increased military pressure from China, Wu expressed confidence that democratic allies would intervene in case of an attack, recognizing their own strategic interests in keeping Taiwan secure.

Advanced chip packaging technologies critical for artificial intelligence, such as Chip-on-Wafer-on-Substrate systems, also remain centralized in Taiwan. No overseas factories are expected to replicate these capabilities until at least 2027, reinforcing Taipei’s position as the world’s most critical semiconductor hub.