Trump is still considering tariffs on Taiwan chips despite TSMC trading $100 billion
Second, tariffs can only allow foreign companies to start producing chips in the United States, if it is cheaper than elsewhere. But the U.S. labor costs are higher, and the country’s lack of complex semiconductor supply chains means that manufacturing will take years, if not decades, to relocate there, and there is little assurance that such a U.S. outpost will be profitable. Faced with U.S. tariffs, it may make more sense for Taiwanese companies like TSMC to simply transfer production to third countries instead of avoiding payments.
However, the Trump administration has the option to expand tariffs to all countries, effectively making U.S. production the only viable option. It can apply tariffs to any final product that contains Taiwanese chips.
The latter idea will constitute a major disruption to the semiconductor industry. A smartphone can have dozens of chips inside, responsible for a series of different functions. There may be thousands of people in a car. Figuring out which of them have components from Taiwan, how much tax should be imposed, and the difficulty of finding alternative products will put a heavy burden on the final product company.
Semiconductor companies may not be ready in this case, especially since most of past products retained tariffs from the past. “Industry around the world has never dealt with such a bargaining tariff,” said a Taiwan-based semiconductor industry insider. “It is possible in theory, but it is almost impossible in reality.”
The policy would force companies like Apple to ask each of their suppliers about the cost of multiple chips they use to determine the appropriate tariffs to declare. “How do customs check after the statement? If I just put down a random value, how do customs know?” said Beard.
The Biden administration has previously discussed component tariffs for Chinese chip manufacturers to weaken the country’s semiconductor industry and protect U.S. national security. But one of the main arguments against the idea is that it is logically difficult to implement, Miller said.
Miller said Washington will definitely consider component tariffs this time, but it is more challenging to enforce them in Taiwan’s chip imports because they play a broader and more important role than China’s chips. “If you are concerned about the administrative complexity of component tariffs only in China, then you should pay more attention to the administrative complexity of Taiwan,” he said.
The biggest loser
Due to its unparalleled weight, TSMC loses less than other companies than others. TSMC currently accounts for about 90% of the most advanced chips worldwide, and its production lines are operating at full capacity. If Trump raises tariffs and forces TSMC to raise prices, the company may lose some orders to competitors, but experts say that is not a big problem.
But it is difficult for TSMC customers to find alternatives quickly. While companies like Samsung and Intel have some degree of comparable knowledge of high-end chip manufacturing, moving mature production processes out of the TSMC factory will be time-consuming, expensive and risky. So instead of buying another chip manufacturer, US companies like Apple and NVIDIA may continue to bill for TSMC products and ultimately pass on higher costs to customers.
