Taiwan says moving 40% of its chip production to the US is impossible

Taiwan says moving 40% of its chip production to the US is impossible

In recent statements, Taiwanese officials and industry leaders said shifting 40% of Taiwan’s chip production to the United States is not feasible. The claim reflects technical limits, investment realities, and supply chain complexity that policymakers should understand.

Why the statement matters for global chip supply

Semiconductors are central to modern economies and national security. Sudden plans to relocate a large share of manufacturing would affect product availability, costs, and geopolitical balance.

This article breaks down the reasons Taiwan says the move is impossible and offers practical approaches for governments and companies to reduce risk without unrealistic timelines.

Technical and scale constraints on moving chip production

Leading-edge chipmaking relies on specialized fabs, tools, and decades of process knowledge. Building equivalent capacity is not a plug-and-play task.

Key technical reasons include fabrication complexity, equipment scarcity, and process maturity.

Fabrication complexity

Advanced nodes require extreme precision, cleanrooms, and validated production flows. Reproducing this at scale takes years of iterative development and yield improvement.

Equipment and materials bottlenecks

Critical tools like extreme ultraviolet lithography (EUV) machines are produced by a handful of suppliers and have long lead times. Materials such as specialty gases and photoresists also face supply constraints.

Skilled labor and know-how

Highly trained engineers and technicians are concentrated in Taiwan, South Korea, Japan, and the Netherlands. Transferring tacit knowledge requires long training periods and on-the-job experience.

Supply chain and ecosystem limitations

Chip fabrication does not exist in isolation. It depends on a broad ecosystem that includes design partners, packaging, testing, and upstream suppliers.

Disrupting any part of that network while trying to relocate capacity risks production delays and lower yields.

• Packaging and testing clusters are geographically concentrated in Asia.
• Supplier networks for chemicals and substrates are specialized and regional.
• Logistics and supplier reliability affect time to volume.

Example: Equipment lead times

A single advanced lithography tool can cost over $100 million and take months to install and qualify. Having the physical building does not mean it will operate at competitive yields immediately.

Economic and policy realities

Costs to build new fabs in the US are high, including land, labor, and regulatory requirements. Government incentives can mitigate costs, but they do not remove technical timelines.

Shifting 40% of production would require hundreds of billions of dollars in investment and a long-term commitment from private and public partners.

Practical steps instead of immediate relocation

Rather than attempting an impossible immediate shift, a mixture of diversification and targeted onshoring is more realistic. Policymakers and companies can take measurable actions to improve resilience.

• Encourage joint ventures and technology transfers with phased milestones.
• Invest in training programs to build a skilled workforce gradually.
• Support development of regional supplier clusters for packaging and testing.
• Create inventories for critical materials and dual-source key equipment suppliers.

Short-term vs long-term measures

Short-term measures should focus on inventory, testing capacity, and supply chain mapping. Long-term measures include building fabs, workforce development, and establishing local supplier networks.

Case study: TSMC in Arizona

TSMC’s investment to build a fab in Arizona illustrates both progress and limits. The project required substantial incentives, multi-year construction, and local hiring efforts.

Even with strong backing, the Arizona facility will represent a fraction of TSMC’s global capacity for several years. The case shows that onshoring is possible but incremental and expensive.

Lessons from the case study

• Large capital and time commitments are mandatory.
• Yield ramp-up is a long process and affects initial output.
• Local supplier development is necessary for full production capability.

What governments and companies can do now

Stakeholders should set realistic goals and coordinate actions across policy, industry, and education. The aim should be resilience rather than unrealistic relocation targets.

Recommended actions:

• Define realistic timelines for capacity expansion with industry partners.
• Provide targeted subsidies tied to training and local supplier development.
• Invest in research on alternatives like packaging innovation and chiplets to reduce dependency on single-node production.
• Map critical supply chains and establish contingency plans for disruptions.

Conclusion

Taiwan’s position that moving 40% of its chip production to the US is impossible is grounded in technical, economic, and supply chain realities. Immediate relocation at that scale is unrealistic.

Policymakers should focus on practical, phased strategies: diversify supply chains, invest in local capacity incrementally, and build workforce and supplier ecosystems. These steps will strengthen resilience without expecting an overnight shift of production.

Small, coordinated actions over time will deliver more reliable outcomes than attempts to force a large-scale geographic redistribution of a complex industry.