The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Robyn Mak

HONG KONG, Dec 8 (Reuters Breakingviews) - U.S. President Donald Trump's vow to bring back semiconductor manufacturing to America may not be so outlandish after all. His administration wants Taiwan's TSMC 2330.TW and others to help the country be self-sufficient in chips. That looks feasible, but with caveats.

Washington is currently in the midst of trade discussions with Taiwan and expects a large investment pledge, Commerce Secretary Howard Lutnick revealedin a recent interview. Just months earlier, he laid out a "Herculean" goal of domestically manufacturing 40% of chips needed, describing that as "reasonable self-sufficiency".

He has a point. Thanks to Asian giants led by Taiwan Semiconductor Manufacturing, now worth $1.2 trillion, America's share of global chip-making capacity declined to just 10% in 2022 from 37% in 1990, according to the Semiconductor Industry Association (SIA). In the most advanced cutting-edge processors that power artificial intelligence data centres, the U.S. share is virtually zero, making the world's largest economy highly dependent on Taiwan. And with Beijing, which views the democratically governed island as its own territory, ratcheting up military and diplomatic pressure, national security officials in Washington are keen to cut that reliance.

There are signs that existing initiatives like the CHIPS and Science Act, are working. Since 2020, the private sector has announced more than $500 billion of investments, per a joint report by the SIA and the Boston Consulting Group; those are expected to more than triple U.S. chipmaking capacity by 2032.

In high-end chips, the gains are potentially more significant. Industry research group TrendForce expect the U.S. to double to 22% its share of global advanced manufacturing capacity in five years, from 2021. That comes mainly at the expense of Taiwan, whose share would decline to less than 60%. In March, market leader TSMC said it will expand its U.S. investments by $100 billion, bringing the total to $165 billion. Lutnick's comments suggest more will be on the way.

TSMC generates roughly three-quarters of its top line from the United States. Assume that's also Uncle Sam's share of global high-end chip demand. That would imply under TrendForce's rosy forecasts that the country would be able to make just under 30% of high-end chips it uses - not that far off from Lutnick's goal, though exceeding his desired timeframe.

The big uncertainty, though, will be in talent and know-how. Taipei is keen to protect its domestic sector and keep its most advanced chipmaking technology on the island. As part of trade negotiations, the Trump administration wants Taiwanese firms to train U.S. workers, Reuters reported last month, citing sources. Washington could demand more, including mandating that TSMC set up more R&D centres stateside and build its most-advanced facilities there instead of in Taiwan. That would represent a huge step toward self-sufficiency.

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CONTEXT NEWS

U.S. Commerce Secretary Howard Lutnick said on December 3 in an interview with CNBC that the U.S. was in the "midst of discussions" with Taiwan about a large investment pledge that would help "bring semiconductor manufacturing back to America".

In September, Lutnick said that his goal was to reach about 40% domestic semiconductor production by the end of President Donald Trump's term in office in 2029, which would take "northwards of $500 billion" in investments.

He had also proposed that Taiwan move chip production stateside to cover half of U.S. demand. In response, Vice Premier Cheng Li-chiun said in October, “This issue was not discussed in this round of negotiation, and we will not agree to such a condition".

(Editing by Antony Currie; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on MAK/ robyn.mak@thomsonreuters.com))