NDC details intended taxes on microchips
In a shift that could have significant repercussions for Taiwan's semiconductor industry, US President Donald Trump announced a 100% tariff on imported semiconductors. This move has the potential to cause increased costs and operational disruptions for domestic production, M&A, partnerships, and exports.
The resilience of Taiwan's semiconductor industry, however, is not to be underestimated. National Development Council (NDC) Minister Paul Liu believes in its strength, and TSMC, one of the world's leading chipmakers, is taking proactive measures to counter these challenges. TSMC is building 2-nanometer fabs in Taiwan and has plans for 1.4-nanometer fabs locally.
The key effects of the US tariffs are manifold. Domestic Production could be affected as chipmakers are incentivized to accelerate shifting production or expand facilities in the US to avoid tariffs. However, this process causes operational delays and higher costs. Mergers and Acquisitions (M&A) may rise as companies seek scale economies or US-based partners to mitigate tariff impacts. Strategic partnerships are also on the rise, aiming to navigate new regulatory or tariff frameworks effectively.
Exports from Taiwanese chipmakers to the US are expected to face reduced competitiveness and margin pressure, leading to decreased export volumes or shifted supply chain strategies. Provisional tariffs of around 20% add direct cost layers that may be passed to US customers or absorbed by margins.
Liu stated that semiconductor firms can compete globally as long as tariff rates remain comparable to rivals. In a positive development, local chipmakers, including TSMC, are expected to be exempt from US President Donald Trump's semiconductor tariffs.
TSMC's planned investment in Arizona is US$165 billion, but the board has not yet discussed additional investment in the US. The company is seeking to lower tariff effects by building factories in the US, pursuing mergers and acquisitions to produce in the US, and forming partnerships with US firms.
The potential effects of tariffs on the local chip industry and broader macroeconomic conditions are considered limited. The government still expects GDP this year to reach 3.1%. United Microelectronics Corp might reduce the effect of tariffs through its cooperation with Intel Corp.
The majority of chips made by local manufacturers are for domestic assembly plants. TSMC's exports to the US account for 1% of its total capacity, with an expected rise to 6% by 2029. The majority of TSMC's research-and-development personnel and leadership team are based in Taiwan, with several factories under construction in Kaohsiung, Chiayi County, Tainan, and Taichung.
The government is providing more than NT$95 billion (US$3.19 billion) to support small and medium-sized enterprises in the short term and promoting artificial intelligence adoption for their long-term business transformation.
In conclusion, while the US tariffs present challenges for Taiwan's semiconductor industry, the industry's resilience and proactive measures taken by companies like TSMC suggest a capacity to weather these challenges. The government's support for local businesses and focus on AI adoption further bolster the industry's prospects.
Given the US tariffs, domestic production in Taiwan's semiconductor industry might be influenced, as companies could be incentivized to shift production or expand facilities in the US to evade tariffs, leading to operational delays and higher costs.
Strategic partnerships with US firms and potential additional investment in US factories, such as TSMC's planned $165 billion investment in Arizona, can help local companies like TSMC lower tariff impacts and maintain their competitiveness in the global market.
