A proposed semiconductor trade framework between Washington and Taipei may carry significant implications for global chip manufacturing. According to Shih Chun-ji (施俊吉), Taiwan's former Vice Premier, the tariff rate quota (TRQ) structure described in a recent Financial Times report could be interpreted as pointing toward a 40% U.S.-based production ratio for chips destined for the American market.
Writing on social media, Shih analyzed the report — “Trump team to link chip tariff exemptions to TSMC investment” (Feb. 10) — which cited an unnamed U.S. Commerce Department official and outlined how semiconductor tariff exemptions would be tied to Taiwanese firms' investment commitments in the United States. (Noted:The Financial Times article did not specify any formal relocation target. The 40% figure referenced by Shih is derived from his interpretation of the quota multipliers described in the report.)
The Mathematics of a Potential 40% Shift
The reported framework employs a multiplier system to determine how many chips Taiwanese companies can export to the U.S. duty-free. According to Shih, the ratios — 2.5 times planned capacity for plants under construction and 1.5 times American output for operational facilities — mathematically align with a 40/60 split between U.S. production and Taiwan-based exports.
During the construction phase of U.S. fabs, duty-free imports are reportedly capped at 2.5 times planned capacity. Because U.S. facilities are not yet producing at that stage, all demand must be met through imports. For a 2.5 multiplier to cover 100% of demand, planned U.S. capacity would need to represent 40% of total U.S.-bound volume (40% × 2.5 = 100%).
Once a U.S. fab becomes operational, the duty-free quota reportedly falls to 1.5 times its American output. If 40% of chips are produced domestically, the remaining 60% must be imported. A 1.5 multiplier applied to a 40% production base yields 60%, again aligning with the same distribution ratio.
Strategic Leverage and Economic Rents
Beyond the numerical implications, Shih suggests that the quota mechanism could provide Taiwan Semiconductor Manufacturing Co. (TSMC) with additional leverage. If companies retain discretion over how duty-free allocations are distributed, TSMC could determine which American clients receive tariff-free volumes.
Major technology firms such as Nvidia, Apple, and Microsoft could compete for such allocations, potentially strengthening TSMC's bargaining position and generating what Shih describes as “economic rents.”
Political Sensitivity and Structural Questions
The 40% figure has drawn political attention. U.S. Commerce Secretary Howard Lutnick has previously referenced a goal of relocating 40% of Taiwan's semiconductor supply chain capacity to the United States. Taiwanese officials, including Vice Premier Cheng Li-chun (鄭麗文), have publicly rejected the feasibility of such a broad transfer.
Shih argues, however, that the definition of “capacity” remains unclear in public discussions. Even in the absence of a formally declared target, he suggests that the quota architecture itself may shape long-term production decisions.
“If the formula is built into the system,” Shih wrote, “the implementation may follow.”
Neither Washington nor Taipei has publicly confirmed that the proposed arrangement includes a binding capacity transfer mandate. Still, Shih's analysis highlights how the design of tariff mechanisms may influence the future geography of semiconductor production.
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