TSMC: Major Beneficiary of Current AI Hype, Yet US Chip Tariffs May Be Its “Kryptonite”

TSMC has undeniably positioned itself at the forefront of the AI chip market, driven by significant demand. Nonetheless, impending US chip tariffs pose a potential threat that could jeopardize its operations.

TSMC Faces Uncertainty Amid Potential US Chip Tariffs

The Taiwanese semiconductor giant has demonstrated remarkable progress in recent years, particularly in meeting evolving market needs. With a sharp rise in AI-related chip demands, TSMC has emerged as a major player, leveraging its innovation and production capabilities. However, this surge in performance could receive a considerable blow should the Trump administration choose to enforce tariffs on Taiwanese imports, and the likelihood of such action appears to be rising.

During his campaign, former President Trump has advocated for imposing tariffs on Taiwanese chips, alleging that Taiwan has appropriated American chip technology. In a strategic response to such threats, TSMC has made substantial investments in the United States, totaling over $100 billion. This investment is aimed at establishing new chip manufacturing and advanced packaging facilities in the U. S., thereby mitigating the impact of tariffs by creating a secondary manufacturing hub outside of Taiwan.

Comments from Commerce Secretary Howard Lutnick highlight the uncertainty surrounding these tariffs. While he remarked on pharmaceutical tariffs, his statement indirectly sheds light on the potential fate of chip tariffs under Trump’s decision-making. The general sentiment signals that companies, including TSMC, might experience a softer approach if they are actively investing in U. S.production facilities.

And so the president will then set his policies. And I’m going to let him wait to decide how he’s going to do it. He said, if you don’t build in America, they’re going to be a high rate. But he may consider that if you’re building in America, to give you the time to build … and then the tariff will be much higher.

If TSMC can secure lower tariff rates, the impact might not be as severe as previously predicted rates of up to 100%.However, even a modest 10% tariff could severely disrupt its operations, given TSMC’s reliance on Taiwan for its advanced nodes. Customers, including industry leaders like Apple and NVIDIA, could also suffer as they may need to increase prices or absorb the cost reductions, ultimately impacting their profit margins.

As for the timeline regarding the implementation of these tariffs, the administration plans to announce them before the deadline of August 1, just a few weeks away. The outcome of this decision is crucial not only for TSMC but also for its extensive network of partners.

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