Second, tariffs can only make foreign companies produce chips in the USA when it becomes cheaper than doing it elsewhere. But higher American labor costs and the lack of a demanding semiconductor supply chain through the country means that the production there will take decades there, and there is hardly a guarantee that such US outposts will be profitable. In view of the US tariffs, it could make more sense for Taiwanese companies like TSMC to simply bring production to a third country to avoid it.
However, the Trump government could choose to expand the tariffs to all countries, which effectively makes production in the USA the only practical alternative. Alternatively, it could apply the tariffs to all end products that contain Taiwanese chips.
The latter idea would be a significant disturbance in the semiconductor industry. A single smartphone can blame dozens of chips inside for a number of different functions. A car may have thousands. If you find out which of you have components from Taiwan, how much these components should be taxed and how difficult it could be to find replacement products, end product companies would burden a high load.
Halver conductor companies are likely to be unprepared for such a scenario, especially since their products have been mainly spared by tariffs in the past. “The industry all over the world has never dealt with such chip tariffs,” says a semiconductor sideline insider based in Taiwan, who published public comments in the alias HSU Mei-Hu. “It is theoretically possible, but almost impossible in practice.”
The guideline would force companies like Apple to ask each of their suppliers according to the costs for the many types of chips that use it only to determine the corresponding number of tariffs that have to be declared. “And how does the customs inspect it after it has been declared? If I only put down a random value, how would customs know? “HSU says.
Biden administration had previously discussed the use of component tariffs against Chinese chip makers in order to weaken the semiconductor industry of this country and to protect the United States national security. However, one of the main arguments against the idea was that it would be logistically difficult to implement it, says Miller.
Miller says that component tariffs will certainly be considered again in Washington this time, but it would be even more difficult to enforce them at Taiwanese chip imports because they play a much larger and more important role than Chinese chips. “If you worried about the administrative complexity of component duties towards China, you should make yourself even more about administrative complexity towards Taiwan,” he says.
Biggest loser
Due to its unprecedented weight in the industry, TSMC loses less due to potential US tariffs than other companies. TSMC is currently producing around 90 percent of the most advanced chips worldwide and its production lines work with full capacity. If Trump increases tariffs and forces the TSMC to increase its prices, the company could lose some orders to competitors, but experts say that this is not a big problem.
However, it will probably be difficult for TSMC customers to quickly find alternatives. Although companies such as Samsung and Intel have reached a comparable know-how in high-end chip production to a certain extent, it would be time-consuming, expensive and risky to get ripe production processes out of TSMC factories. Instead of choosing another chip maker, American companies such as Apple and Nvidia will probably keep the invoice for TSMC products again and again and finally pass on the higher costs to their customers.
