Secondly, tariffs can only make foreign companies begin to produce chips in the United States if it becomes cheaper than doing it elsewhere. But the highest American labor costs and the lack of a sophisticated semiconductor supply chain means that the manufacture of the manufacture there will take years, if not decades, and there are few guarantees that such advanced positions of the United States will be profitable. Faced with US rates, it could make more sense than Taiwanese companies such as TSMC simply transfer production to a third country to avoid paying them.
But the Trump administration could choose to expand tariffs to all countries, which makes production in the United States the only viable alternative. Alternatively, you could apply tariffs to any final product containing Taiwanese chips.
The last idea would constitute a significant interruption for the semiconductor industry. A single smartphone can have dozens of chips inside responsible for a variety of different functions; A car can have thousands. Discovering which of them have Taiwan components, how much these components must be imposed and how difficult it could be to find replacement products to put a heavy load for final products.
It is likely that semiconductor companies are not prepared for such scenario, especially because their products have been mainly saved from tariffs in the past. “The industry around the world has never dealt with chips tariffs like this before,” says privileged information from the Taiwan semiconductor industry that publishes public comments under alias Hsu Mei-Hu. “It is theoretically possible, but almost impossible in practice.”
Politics would force companies as Apple to ask each of its suppliers about the cost of the many types of chips that it uses, only to determine the appropriate amount of tariffs to declare. “And after it is declared, how does Customs inspect it? If I just put random value, how would Customs know? Hsu says.
The Biden administration had previously discussed the use of component tariffs against Chinese chip manufacturers to weaken the country’s semiconductor industry and protect the national security of the United States. But one of the main arguments against the idea was that it would be logistically difficult to implement, says Miller.
Miller says that component tariffs are certainly considering again in Washington this time, but it would be even more difficult to fulfill them imports of Taiwanese chips because they play a much broader and more important role than Chinese chips. “If you are worried about the administrative complexity of component tariffs only against China, you must be even more concerned about administrative complexity against Taiwan,” he says.
Major losses
TSMC can lose less of the possible American tariffs than other companies due to their incomparable weight in the industry. TSMC currently manufactures approximately 90 percent of the most advanced chips worldwide, and their production lines currently operate at full capacity. If Trump raises tariffs and that forces TSMC to increase its prices, the company could lose some orders for competitors, but experts say that is not really a great concern.
But it is probably difficult for TSMC customers to quickly find alternatives. Although companies such as Samsung and Intel have achieved comparable knowledge in the manufacture of high -end chips to some extent, it would be slow, expensive and risky to remove mature production processes from TSMC factories. Therefore, instead of going to another chips manufacturer, it is likely that American companies such as Apple and Nvidia continue paying the TSMC products bill and, finally, transmit the highest costs to their customers.