Taiwan refuses to manufacture half of its chips in the US.

The government of the Republic of China has responded to U.S. Secretary of Commerce Howard Lutnick's statements that Taiwanese companies should manufacture half of the chips absorbed by the market in the United States. Opposition outrage has prompted Vice President Cheng Li Chun to clarify that "Taiwan has not committed to a 50/50 split and never will."

Lutnick stated in an interview last Sunday that "the US should produce its own chips" for national security reasons. In this regard, he considered it "necessary" that for every chip Taiwan exports to the United States, it manufacture another chip in the United States. To push in this direction, he suggested a 100% tariff on every chip that exceeds this quota.

This threat has alarmed the Chinese nationalist opposition, which holds the majority in Taipei's Legislative Yuan (congress). It demanded that Taiwan's sovereignist vice president clarify the terms of the negotiations she has led in recent months. These negotiations have not resulted in a 20% tariff on its exports to the US, although they have succeeded in exempting semiconductors.

In addition, the Pentagon has extracted a commitment from Taiwan to increase its defense budget to 3.32% of GDP by 2026. As is traditional, the vast majority of the budget will be allocated to arms purchases from US multinationals, despite the fact that these companies already have $21.5 billion in backlogs of deliveries. The arms industry, incidentally, is one of the industries most closely dependent on next-generation chips.

Although the vice president renounced her American citizenship a few years ago (her mother is), she doesn't want to go down in history as the Delilah who cut the hair of the Samson of Taiwan's industry and autonomy.

But the Kuomintang, which ruled the self-ruled Chinese island for decades and is now in opposition, doesn't seem convinced and has come out strongly against the alleged "50/50 agreement," despite the denial. "So it's 60/40? 70/30?" asks MP Hsieh Lung Chieh.

His fellow MP, Eric Chu Li-luan, has warned: "We will never give up TSMC." Such a move, he argues, would amount to abandoning the "silicon shield" and its contribution to peace. According to this theory, the fact that advanced semiconductor production is concentrated in Taiwan is the greatest deterrent to those in a position to start a war on the island.

This fear isn't unfounded. US Congressman Seth Moulton also said a couple of years ago: "We should make it very clear to the Chinese that if they invade Taiwan, we will blow up TSMC."

The volume of investment now required—in a demand even more specific than that made by President Donald Trump to Japan, South Korea, or the EU—is frightening in Taipei. "It could ultimately reach $500 billion, decapitalize Taiwan's economy, and condemn tens of thousands of engineers to emigrate," warned former MP Chiu Yi, according to the South China Morning Post.

The determination to break the concentration of the most advanced semiconductors in Taiwan took shape during Trump's first term, when in his final months he extracted a $12 billion investment commitment from TSMC.

This was later finalized under irresistible pressure from President Joe Biden, who raised the funding by $40 billion for three chip factories in Arizona. To this end, he did not hesitate to offer incentives of more than $6 billion from public funds, thereby undermining free competition. The first 4-nanometer chips (25,000 times thinner than a hair) began printing in the last quarter of last year.

But TSCM's massive American investment—which employs 3,000 people and has a planned expansion plan to reach 12,000—doesn't satisfy the current White House. Not even after a March investment commitment of an additional $100 billion over several years. It has, however, escaped the harassment from the Department of Immigration that the Hyundai battery factory under construction in Georgia has suffered, to the immense indignation of more than 300 South Korean employees who were handcuffed and then deported , all but one of whom have vowed "never to return to the US."

The controversy comes a week before the commemoration of the National Day of the Republic of China (Taiwan's official name), which commemorates the overthrow of the last emperor, the child Puyi, on October 10, 1911. Under the Democratic Progressive Party, the party most comfortable with US tutelage, the name has been altered in English to Taiwan National Day, a controversial development on an island divided over its sense of belonging. So much so that the last president under the Kuomintang, Ma Ying Jeou, boycotted the celebration two years ago "because of its pro-independence stance."

Most of the Taiwanese business community, many of whom have significant interests in the People's Republic of China, are wary of the flirtation with formal secession from the ruling party, and more specifically from President William Lai. Such a move would immediately trigger "reunification by force," as every general secretary of the Chinese Communist Party has warned. The US, however, has legally obligated itself to arm Taiwan to prevent precisely that.

Before the last election, someone as prominent as Foxconn founder Terry Guo—who makes Apple's iPhones—warned that Taiwan could become "the next Ukraine" if it wasn't careful and threatened to run for president, only to withdraw at the last minute.