TSMC Likely Unaffected by U.S. Chip Tariffs as It Directly Sells Only 1% to American Companies

Despite the looming threat of tariffs on semiconductors in the United States, Taiwan Semiconductor Manufacturing Company (TSMC) appears to be relatively insulated from significant repercussions. The reason is straightforward: TSMC’s sales to US-based clients represent only a minuscule fraction of the company’s overall semiconductor revenues.

TSMC’s Manufacturing Initiatives in the US Could Lead to Tariff Exceptions

The semiconductor sector perceives the proposed tariffs under Section 232 as a substantial hindrance, akin to ‘kryptonite’ for companies operating in the US market. Elevated tariffs threaten to erode already narrow profit margins in the semiconductor landscape. Although TSMC has expressed apprehensions regarding potential tariffs, the political climate under the Trump administration could offer some leeway due to TSMC’s ongoing investments in the United States.

Nevertheless, it is essential to note that only 1% of TSMC’s semiconductor output engages in direct transactions with US entities, indicating a limited risk exposure. A report from CNA highlighted insights from the head of Taiwan’s National Development Council, asserting that US tariffs are unlikely to significantly affect TSMC’s business dynamics. This resilience stems from a reduction in chips sourced from Taiwan, as well as the fact that roughly 75% of Taiwan’s overall export portfolio remains insulated from US tariffs, particularly affecting categories like steel and aluminum.

Rapidus semiconductor facility in Japan aiming for 2nm chip mass production by 2027 amid competition from TSMC and Samsung

In light of the tariff threats, Taiwan is actively encouraging its semiconductor firms to establish production facilities in the United States. This strategy has catalyzed a notable shift in manufacturing from East to West, with companies such as Foxconn, Quanta, Wistron, UMC, and TSMC all pursuing opportunities to ramp up production stateside. This shift underscores the effectiveness of the Trump administration’s semiconductor policies aimed at bolstering domestic manufacturing.

Regarding the impact of Section 232 tariffs, TSMC is poised to face minimal effects, primarily due to its strong affiliations with the former Trump administration. However, given the fluid nature of US government policies, the future remains unpredictable, and TSMC must remain vigilant in navigating these potential changes.

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