A recent proposal by the U.S. Secretary of Commerce for a “50-50 split” in chip manufacturing between the U.S. and Taiwan has drawn widespread attention. Da-Nien Liu, Director of the Regional Development Study Center at the Chung-Hua Institution for Economic Research (CIER), stated frankly that the proposal is both unfair and impractical. TSMC has already committed to investing US$165 billion in Arizona for six wafer fabs, two advanced packaging plants, and an R&D center—the largest overseas investment in its history. However, Liu noted that the U.S. faces a shortage of local talent, making it unrealistic to enforce such a capacity-sharing plan.
Director Liu pointed out that the “50-50 split” proposal is not merely about capacity allocation but is a signal that the U.S. is prioritizing national security over efficiency. The U.S. intends to shift Taiwan’s role from a “sole supplier” to an “indispensable technology ally,” thereby diversifying risks and solidifying its strategic partnership. However, this would lead to higher costs and lower efficiency in the global supply chain. As Taiwan controls over 90% of the world’s advanced semiconductor manufacturing capacity, it must strategically weigh short-term sacrifices against long-term security assurances as its “Silicon Shield” is being redefined.
PMI Data Shows Continued Contraction in Manufacturing Sector
Against this backdrop, Taiwan’s manufacturing sector continues to face pressure. According to data from the CIER, Taiwan’s manufacturing Purchasing Managers’ Index (PMI) fell to 47.9 in August 2025, its lowest point since April 2024. The outlook index declined further to 37.6, remaining below the 50-point threshold that separates growth from contraction for the fifth consecutive month. New orders, production, and employment have all contracted. Only the chemical and biomedical industry continued to expand, while all other major industries contracted. This indicates that businesses are largely adopting a wait-and-see approach pending the outcome of U.S.-Taiwan tariff negotiations and the specifics of the U.S. “Section 232” provisions.
The CIER emphasized that the U.S. is closely linking its industrial policy to the negotiations, which could fuel “semiconductor inflation” in the short term and reshape the global supply chain landscape in the long term. With both its semiconductor and manufacturing sectors under pressure, Taiwan must cautiously adjust its strategy to maintain its international competitiveness and industrial resilience.
Author: CIER Editorial Team
Date: September 30, 2025