US President Donald Trump has threatened to impose import tariffs of up to 100% on semiconductors, and specifically mentioned that he hopes the chip industry will return to the US from Taiwan. However, technology industry experts believe that the Washington authorities' attempt to use tariffs to force TSMC (2330) to move most of its operations to the US is unrealistic and reflects their ignorance of the chip industry.

The Financial Times (FT) reported on the 11th that Dan Nystedt, vice president of Asian private investment institution TriOrient, pointed out that although about 70% of TSMC's revenue came from North America last year (2024), "few chips were exported directly to the United States." "Most chips are shipped to China, India and other places, and are placed in iPhones and servers before being exported to the United States."

Analysts believe that since US tariffs are generally on finished products rather than components, it would be a "tough" challenge for US Customs to impose tariffs on the vast majority of chips manufactured by TSMC for US customers.

TSMC's global R&D center is located in Taiwan, which is the key to the stalemate. The reason why TSMC can quickly expand production of each generation of process while maintaining high yield is mainly due to the R&D engineers who are responsible for adjusting equipment on-site at the wafer fab. Management believes that it is not feasible to move the R&D center to the United States or set up a parallel R&D institution there.

Analysts believe that TSMC can speed up the timetable for the Arizona plant to introduce advanced processes to the United States, or even promise additional investment as a compromise. Sources familiar with the company's details also revealed that TSMC's board of directors may decide to establish advanced packaging capacity in the United States (most advanced chips are still packaged in Taiwan). This can increase TSMC's commitment to the United States and ensure Taiwan's position as a global semiconductor manufacturing center.

Observers believe that American customers will have to help convince Washington authorities that such concessions are enough to exempt TSMC from tariffs. Nystedt pointed out that chip designers such as Apple and Nvidia will bear the consequences of chip tariffs.

According to statistics, Taiwan's investment in the United States will reach US$14.1 billion in 2024, and Taiwan's foreign direct investment will be US$48.6 billion, mainly driven by TSMC's surge in overseas investment.

Former US Secretary of Commerce Gina Raimondo previously pointed out that TSMC's Arizona plant has begun producing advanced 4-nanometer chips for American customers, and the yield is comparable to that of Taiwan. According to TSMC's plan, the second Arizona wafer plant will begin producing 2-nanometer chips in 2028; the company has also agreed to use the most advanced chip process "A16".

Three major announcements will be made

The Financial Times (FT) reported that TSMC may make three major announcements after this board meeting:

Accelerating the pace of moving advanced processes to a new plant in Arizona

Establishing advanced packaging capacity in the United States

Promising to expand investment

FT pointed out that TSMC management must achieve a "delicate balance". On the one hand, it must persuade US President Trump to fulfill the subsidy promise made during the Biden administration. On the other hand, moving too much production to the United States may not only weaken TSMC's business model, but also be politically difficult in Taiwan. A person close to TSMC said: "TSMC must be as sensitive to the Taiwanese government as it is to the US government and American companies."

One of the key sticking points is TSMC's R&D center in Taiwan. TSMC has long been able to quickly increase the production scale of each new generation of process while maintaining high yields, thanks to the practice of sending R&D engineers to the production line to fine-tune mechanical tools. TSMC managers believe that moving the R&D center to the United States or setting up another R&D institution in the United States is not an option.

Analysts pointed out that as a compromise, TSMC may accelerate the pace of moving advanced processes to the new plant in Arizona, or may promise to expand investment. TSMC's new plant in Arizona is mass-producing 4-nanometer chips, which is one generation behind the chip process mass-produced in Taiwan. It has previously promised to transfer 2-nanometer chip production to the United States in 2028, about two years later than Taiwan's start of production, and to bring the third wafer plant in Arizona online by 2030.

People familiar with the matter revealed that TSMC's board of directors may also decide to establish advanced packaging capacity in the United States. However, while TSMC is increasing its commitment to the United States, it may still use Taiwan as the core of global chip manufacturing.

Observers believe that TSMC's American customers will also have to help convince Washington that these actions are enough to justify shelving semiconductor tariffs. TriOrient Vice President Nasdaq said, "Apple, Nvidia and other chip designers will be the first to bear the brunt of (chip tariffs).

Source: Content compiled from FT

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