Taiwan-US Chip Talks: A 50-50 Split Isn’t the Path—What the Reality Teaches About Tech Policy

Taiwan-US Chip Talks: Why a 50-50 Split Won’t Happen—and What That Means for Global Tech

The drumbeat around a proposed U.S.–Taiwan 50-50 split of semiconductor production collides with a reality: Taiwan has signaled that such an arrangement wasn’t discussed, and certainly isn’t on the table. Yet the dialogue itself exposes the fragile choreography of a global chip supply chain where incentives, sovereignty, and competitive geopolitics collide with the imperative of continuous AI-enabled growth.

Executive snapshot

Taiwan’s top tariff negotiator denies any commitment to a 50-50 production split with the United States.
The U.S. pitch, as reported, proposed a symmetrical footprint for future chip manufacturing, but Taiwan did not discuss or commit to it.
Tariffs: Taiwan’s exports to the United States are cited as subject to a 20% tariff.
TSMC, the world’s largest contract chipmaker, is expanding in the United States with a large-scale Arizona project, while most production remains in Taiwan.
Official statements describe progress in “substantive” talks, but no formal agreement on crucial structural terms has emerged.

What a hypothetical 50-50 split would entail, in plain terms

Capital reallocation: A true 50-50 split would imply a massive realignment of both nations’ capex—requiring new plants, tooling, and supply chain hubs in parallel across continents.
IP and know-how: The arrangement would raise questions about intellectual property control, process-node leadership, and the ability of each side to access sensitive manufacturing know-how on equal footing.
Strategic risk sharing: A bilateral ownership-style model would bind geopolitical risk to corporate balance sheets, potentially slowing investment if political winds shift.
Operational complexity: Coordinated standards, security protocols, and regulatory alignment would increase transaction costs and governance overhead for contract manufacturers and fabless designers alike.

Why Taiwan resists such a framework

Sovereign capability & supply chain resilience: Taiwan anchors much of the world’s advanced semiconductor capacity. A 50-50 ownership or production model could blur lines between private sector leadership and national security considerations.
Autonomy in industrial policy: Taiwan’s leadership has historically prioritized maintaining domestic control over flagship facilities and strategic industries, particularly in areas critical to national security and economic competition.
Risk of unintended dependencies: Pushing for parity without a clear, verifiable framework could transfer concentration risk (and political leverage) from one side to another, with uncertain outcomes for global price stability and innovation dynamics.

Implications for policy and markets

From a policy perspective, the debate highlights the tension between free-market efficiency and strategic protectionism. The core questions are: how do we ensure supply security for critical tech while preserving competitive markets that spur innovation?

Supply-chain resilience vs. market freedom: A heavy-handed requirement to co-locate or evenly split production may reduce dynamic efficiency and slow innovation cycles. The market benefits from competition among global fab peers who continuously push process improvements.
Tariffs as a tool of strategic leverage: A 20% tariff on Taiwan exports, as cited, tilts incentives toward diversification and onshoring only if the policy framework also provides clear, near-term value to domestic users and consumers.
US policy posture: The United States has signaled an intent to bolster domestic semiconductor capacity through subsidies and incentives. The cost—expressed in fiscal outlays and potential inflationary pressures—must be weighed against the security and tech leadership gains.
Taiwan’s role in global tech: Even with U.S. press for closer alignment, Taiwan’s manufacturing ecosystem remains a cornerstone of global supply, especially for leading-edge nodes. The status quo benefits the broader economy by preserving scale efficiencies and specialization advantages.

Contextual data you should know

Metric	Current State (as described)
Main producing hub	Taiwan, home to TSMC—the largest contract chipmaker; majority of advanced nodes produced there.
US investment in chip manufacturing	TSMC’s Arizona project cited as $165 billion; actual composition includes multiple facilities with varying cost scales.
Tariffs on Taiwan exports to the US	Reported at 20% in the article.
US-Chips policy context	Ongoing efforts to diversify supply chains and increase domestic capacity through subsidies and incentives.

Note: The numbers above reflect the article’s framing. Real-world policy is more nuanced, with ongoing debates about tariffs, subsidies, and strategic stockpiles.

Bottom line for policymakers and investors

The aspiration to protect and advance semiconductor leadership should not be confused with a blueprint for state-controlled production. A 50-50 split, if pursued as formal policy, would entail profound shifts in corporate governance, capital budgeting, and international diplomacy. An outcome oriented toward market-driven diversification—paired with transparent subsidies, predictable regulatory environments, and robust export controls—offers a path to resilience without sacrificing the efficiency that has driven global tech leadership.

In my view as an economist, the priority should be incentivizing broad-based investment in domestic manufacturing where it makes sense (plug-and-play to AI-enabled growth) while preserving the primacy of competitive markets that reward efficiency and innovation. Trade policy ought to be designed to reduce unnecessary frictions, not to force artificial ownership structures that risk misallocating capital.

Key players & signals

Taiwan’s negotiating team rejects a 50-50 chip split; emphasizes ongoing talks.
US officials have publicly floated the idea, but there is no confirmed agreement.
TSMC’s US investment signals a push toward reshoring, while most advanced production remains in Taiwan.

Risks to watch

Policy misalignment could spur hedge investments in alternative regions.
Tariff swings affect pricing of AI-era chips for downstream users.
Geopolitical shifts could reconfigure which markets effectively anchor global supply chains.

Policy takeaways for leaders

Favor market-friendly, technology-led diversification over coercive equity-sharing mandates.
Maintain robust incentives to build domestic capacity without dismantling global specialization advantages.
Ensure export controls and foreign investment rules promote security without crowding out innovation.

Note: The content reflects a data-informed perspective that values market mechanisms and limited government intervention, while acknowledging geopolitical realities shaping semiconductor policy.