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The impact of U.S. tariffs on the high-tech industry and TSMC’s potential response
The Trump administration’s tariff threats against TSMC and Taiwan’s semiconductor industry reflect the U.S. strategic goal to reduce its reliance on foreign-made chips. However, the global semiconductor supply chain is complex, and U.S. companies depend heavily on TSMC’s advanced manufacturing processes. Even with increased tariffs, it will be difficult to change the supply chain structure in the short term, which could impact the competitiveness of U.S. tech companies and present challenges for the global semiconductor industry. We suggest that TSMC might consider acquiring Intel’s U.S.-based semiconductor fabrication plants to accelerate local production. This tariff dispute will reshape the future of the global chip industry.
According to a report by the Financial Times, Taiwan and TSMC are actively responding to Donald Trump’s tariff threats on foreign-made semiconductors. Trump’s goal is to bring semiconductor production back to the U.S. and cancel the subsidy plan for TSMC’s U.S. investments, which could significantly affect TSMC’s operations. Taiwan’s Deputy Minister of Economic Affairs, John Deng, is in negotiations with U.S. officials, while TSMC is holding meetings in Arizona to discuss possible responses. Analysts suggest that the U.S. may have misunderstood the dynamics of the semiconductor supply chain, and this tariff threat has raised concerns among Taiwan’s exporters and tech companies. The report highlights two main issues: the U.S. government’s tariff threats on semiconductor imports and how TSMC plans to respond.
Our Perspective
To understand the current situation: TSMC holds over 50% of the global foundry market share, with its share in advanced processes exceeding 90%, making it critical to the global high-tech industry. Although Taiwan’s direct chip exports to the U.S. account for less than 5%, these exports are vital to industries such as defense technology, advanced medical equipment, precision instruments, aerospace, and smart automotive, all of which rely on advanced semiconductor technology. If the U.S. imposes higher tariffs, the cost will be passed on to these companies and their supply chains, directly affecting these industries.
Furthermore, the core supply chain of the U.S. high-tech industry still depends heavily on TSMC’s advanced process technology. For instance, companies like Apple, NVIDIA, AMD, Qualcomm, Broadcom, and Marvell rely on TSMC for their Surface-Mount Technology (SMT) production. Even if the U.S. imposes a 100% tariff on Taiwanese chips, these companies would still need to import chips through overseas supply chains, making it unlikely that the “local supply” policy can be achieved. Moreover, rising costs in SMT and Printed Circuit Board (PCB) production could undermine the competitiveness of U.S. companies.
Now, let’s look at the feasibility of U.S. companies shifting orders. The conclusion is that the feasibility of moving advanced orders is low. If U.S. companies decide to shift production, it typically takes 1 to 2 years to adjust for mature processes. It is more likely that production will be shifted to U.S.-based GlobalFoundries (GF) or TSMC’s Arizona facility, or to wafer fabs in Singapore operated by TSMC, UMC, or GF. European Integrated Device Manufacturers (IDMs) are less likely to benefit from such shifts due to technological and capacity limitations.
As for advanced processes, the difficulty in shifting orders is even greater. While Intel has secured some defense semiconductor projects and owns Altera FPGA technology (used primarily in industrial instruments and defense sectors), it is constrained by technical capabilities, research and development resources, and a shortage of process engineers. In the short term, Intel will not be able to fill TSMC’s supply gap, further reducing the likelihood of such shifts benefiting other companies.
Finally, let’s consider TSMC’s possible response strategies. Beyond expanding its U.S. investments or seeking a compromise with the U.S. government, we propose another perspective: In the event that the U.S. enforces semiconductor supply chain localization, TSMC could consider acquiring some of Intel’s advanced process wafer fabs. Although this would involve high costs and face challenges such as technological differences, corporate culture integration, and regulatory scrutiny, it would allow TSMC to quickly meet U.S. government demands. Acquiring existing plants would be faster and less risky than building new plants from scratch. However, this strategy would still need to account for the stability of U.S. government policies and the future direction of the global supply chain. In any case, this tariff dispute will significantly influence the future development of the global chip industry and should be closely monitored.
This article is part of our Taiwan Tech and Market Shifts series.
It explores how Taiwan’s tech industries are adapting to global shifts in supply chains, manufacturing, policy, and innovation.