US President Trump wants an import tax of 100 percent on chips made in foreign TSMC factories, even though those factories make mostly American chips.
US President Donald Trump is angry that other countries make more microchips than the US, and wants to solve that the way he tries to solve most perceived problems: with aggressive tariffs. Specifically, Trump plans to make chips made by TSMC’s foreign factories subject to import tariffs. These could reach up to 100 percent of the chip’s value. Trump hopes this will encourage TSMC to build factories in the US.
The reasoning is interesting. It is American companies such as Nvidia, AMD, Apple and even Intel that use TSMC’s foreign manufacturing capacity. That company is a leader in semiconductor manufacturing and has the most advanced production belts in the world.
By imposing tariffs, U.S. customers would have to pay more for chips (or devices with chips) sourced from Taiwan. For example, an American would have to pay a lot more for a new iPhone, an Nvidia graphics card or even a laptop from, say, HP or Dell. TSMC does not have to pay more: import tariffs are the importer’s responsibility.
Unclear impact for TSMC
TSMC’s capacity has been heavily demanded. As long as orders at TSMC do not fall, tariffs will not hit the company. Prices for U.S. companies and consumers will rise, though. If those rise enough that U.S. demand for devices with microchips falls, then demand for production capacity at TSMC may fall with it, and the company does have an incentive to produce in the U.S.
TSMC does already plan to expand production capacity to the U.S. with the construction of a large plant in Arizona. That factory will not be enough to meet U.S. demand. Chip factories are huge investments of tens of billions of dollars, which take years to build. The question is whether Trump’s tariffs will hit TSMC hard enough to invest so much money and time, when the U.S. market has little choice and customers are literally waiting in line for TSMC.
Good for Intel
The tariffs are good news for Intel, though. That is currently going through a difficult period with chips that are less competitive than alternatives from AMD and Qualcomm. However, Intel has high U.S. manufacturing capacity, its competitors do not. AMD, for example, depends on any U.S. capacity from TSMC to bypass tariffs in the local market, but that capacity is very limited.
It is hard to predict what the tariffs will actually accomplish, other than a price hike for electronics in the U.S., but there is a chance that Intel’s chips could suddenly become a lot more interesting again in that market. In the long run, the strategy may well prompt TSMC to put more effort into the U.S., on demand from AMD and Nvidia.
Finally, the strategy offers opportunities for the rest of the world. There is a chance that tariffs will free up coveted capacity at TSMC for other players, allowing European and Asian markets to have more chips available.