Tuesday, January 28th 2025
Trump Administration Plans to Impose 25-100% Tariffs on Taiwan-Sourced Chips, Including TSMC
The United States, currently led by the Trump administration, could be preparing a surprise package to its close silicon ally—Taiwan. During a House GOP issues conference in Florida, US President Donald Trump announced that he would impose 25% to 100% tariffs on Taiwan-made chips, including the world's leading silicon manufacturer, TSMC. Trump addressed the conference, saying, "In the very near future, we are going to be placing tariffs on foreign production of computer chips, semiconductors, and pharmaceuticals to return production of these essential goods to the United States. They left us and went to Taiwan; we want them to come back. We do not want to give them billions of dollars like this ridiculous program that Biden has given everybody billions of dollars. They already have billions of dollars. […] They did not need money. They needed an incentive. And the incentive is going to be they [do not want to] pay a 25%, 50% or even a 100% tax."
The issue for TSMC is its massive reliance on US companies to drive revenue. The majority of its cutting-edge silicon is going to only a handful of companies, including Apple, NVIDIA, Qualcomm, and Broadcom. With tariffs, the supply chain economics, especially in the world of semiconductors, will break. TSMC's most significant export country is the US, and US companies with trillions of US Dollars of market capitalization rely on Taiwanese silicon. As a result, TSMC will most likely raise its wafer prices, with results trickling down to US companies raising their product prices with additional price hikes. TSMC plans to bring its advanced manufacturing on American soil, but given that these tariffs might break the economic model it currently operates under, it may need to happen sooner. Taiwan-based silicon giant has planned to leave US facilities trailing behind by a generation or two of advanced manufacturing, while domestic facilities produce the newest nodes. If Trump decides to go through tariffs, TSMC could make additional changes to its US-based manufacturing plans.
Sources:
C-SPAN, via Tom's Hardware
The issue for TSMC is its massive reliance on US companies to drive revenue. The majority of its cutting-edge silicon is going to only a handful of companies, including Apple, NVIDIA, Qualcomm, and Broadcom. With tariffs, the supply chain economics, especially in the world of semiconductors, will break. TSMC's most significant export country is the US, and US companies with trillions of US Dollars of market capitalization rely on Taiwanese silicon. As a result, TSMC will most likely raise its wafer prices, with results trickling down to US companies raising their product prices with additional price hikes. TSMC plans to bring its advanced manufacturing on American soil, but given that these tariffs might break the economic model it currently operates under, it may need to happen sooner. Taiwan-based silicon giant has planned to leave US facilities trailing behind by a generation or two of advanced manufacturing, while domestic facilities produce the newest nodes. If Trump decides to go through tariffs, TSMC could make additional changes to its US-based manufacturing plans.
57 Comments on Trump Administration Plans to Impose 25-100% Tariffs on Taiwan-Sourced Chips, Including TSMC
Fair point. I decided not to delineate like this precisely for that reason - AI in the perception of most people IS what CS calls “strong AI”. There are expectations for those two letters, for better or worse. Of course, LLMs are technically AI, just an algorithm based “weak” one, but that is a distinction that usually gets omitted, hence all the nonsense takes we see later. Strong AI, however, remains an ever-elusive goal. Potentially unattainable. Certainly not using machine learning, at least not in its current form where most improvements come from efficiency upgrades to the data scraping process for LLM training. I just get annoyed at the industry trying to present things that are not what they proclaim to be. Way they love to market stuff like their “AI” in smartphones, for example, you would think we all now have personal AI goth GFs akin to Blade Runner 2049. Reality, as ever, is much more pedestrian.
Of course, if there is really such a shortage, and such a demand from small business and content creators for AI acceleration, we're going to see cryptomadness levels of scalping straight from the partners.
I just see the big pieces like this:
- World is deglobalizing, friend shoring, being divided up - it's a slow process, this is part of that process (read: M. Pettis, P. Zeihan, D. Alperovitch, G. S. Takach, RAND, PIEE)
- US needs (or sees it needs) to re-industrialize, which means drawing money, investments, opportunities and risk taking home (see previous, Brad Setser, esp. Peter Zeihan)
- The classic model for this is economics has been the Import Substitution Industrialization model, espoused by Raul Prebisch, and for some time successfully historically used by such countries as Argentina, Brazil, India and Mexico
- Basic idea :pull in investments, tax imports highly, increase inflation AND domestic consumption, these drive economic growth and animal spirits, driving a self-enforcing loop of domestic industrial manufacturing investments (which is the goal)
Thus, expects, regardless of what the talking heads say or promise:
- higher US inflation
- higher tariffs, and thus, trade wars
- currency volatility esp vis-a-vis USD and EMA currencies (China peg will break)
- money escaping from periphery to US
- stories how this will be the new Golden Age of United states, which have already begun
Time will tell, whether it will work this time around. Over a long term it has always lead to inefficiencies, lack of competition and struggling economy. But it can boost rapid re-industrialization and domestic manufacturing investments in the short term for some time, if skilled labour is available to implement it (see the issue about H-1B VISAs, as boomers are exiting en masse, not enough Xers and millenials to fill that skill gap, need brain power from abroad to fill the gap).