NVIDIA CEO Jensen Huang rejected rumours regarding TSMC shifting 40% of its operations to the USA. He added that Taiwan will continue to be the major player in semiconductor manufacturing and the foundry investments in the USA are a necessary ‘expansion’ move to meet the ongoing AI demand.
The rumours about the world’s largest chip manufacturer relocating to America surfaced after the U.S. Commerce Secretary Howard Lutnick’s CNBC interview, where he said US-Taiwan trade agreements aim to shift 40% of Taiwan’s semiconductor supply chain to the U.S by the end of 2029.
The Trade Deal Behind the Rumours: The US-Taiwan Semiconductor Trade Agreement
The US-Taiwan Semiconductor Trade Agreement was announced on January 15, 2026. It aims to expand chip production capacity into the U.S. amid massive demands for AI hardware and potential bottlenecks in Taiwan, like power grids and space.
The deal includes Taiwanese firms pledging $250 billion in investment in the U.S. on semiconductors, AI, and energy. In return, Taiwanese companies will enjoy higher tariff-free import quotas and a general 5% drop in tariffs on almost all Taiwanese goods. Thus, tariffs will be reduced from an earlier threatened 20% to 15%.
The deal aims to cut the trade deficit and secure AI supply amid China-Taiwan conflict risks and chaotic U.S. foreign policies. Moreover, TSMC has already committed a total of $165 billion in investments in the USA. America’s push to bring more Taiwanese chip production and TSMC’s expansion in the U.S. were read together as a production shift by many.
Why is it Important for Taiwan to remain the Semiconductor Capital?
Taiwan plays a crucial role in global chip production and supply. TSMC produces 90% of advanced GPUs and chips for the world. The world’s most valuable company (by market capitalization) and tech leader, Nvidia, outsources nearly 100% of its advanced GPU production to TSMC.
Any operational disruption of TSMC by means of Chinese aggression or infrastructure failure of the country can wipe away Nvidia’s tech domination. Hence, Taiwan and its state-of-the-art foundries are central to the global tech supply chain. This strategic positioning is largely termed as the “silicon shield” of the country since it makes Taiwan a priority ally for the USA, deterring Chinese attacks on the country.
Hence, domination in semiconductor manufacturing is not only crucial for Taiwan’s economy but also for its national security. The island has been able to effectively stand off China since the rest of the world (the U.S., especially) wants it to be autonomous and not under China.
Is TSMC Moving to the USA?
TSMC is expanding to the U.S., but it’s certainly not moving away from Taiwan. The foundry expansion to other countries has become necessary to meet the ongoing demand, but the production of the most advanced chips in high volume still remains concentrated in Taiwan and is less likely to be reproduced in other countries any time soon. So, Taiwan’s “Silicon shield” will remain.
NVIDIA CEO sums up TSMC’s necessary expansion like this: “TSMC is going to have to add tremendous amounts of capacity in the next decade. And some of it will be manufactured in the United States, some of it will be in Europe, some of it will be in Japan, and some of it will be here. A lot of it will continue to be here. So my expectation is that the demand for TSMC wafers and capacity will far exceed the amount of energy available in Taiwan.”
Moreover, TSMC’s one and only functional foundry in the USA started producing 4nm chips in Q4 2024, yet production capacity lags far behind the foundries in Taiwan. In short, TSMC will expand to other countries to meet the AI demand. But advanced and high-volume production is likely to remain concentrated in Taiwan.
