U.S. President Donald Trump announced plans Monday night to impose massive tariffs on Taiwan-made chips in an attempt to incentivize companies to relocate production to the United States. On the one hand, this could reduce American companies' reliance on Taiwan in general and TSMC in particular. On the other hand, building a semiconductor fab takes three to four years, so the effect of production moving to the US due to tariffs may not be felt for some time.
"In the very near future, we are going to be placing tariffs on foreign production of computer chips, semiconductors, and pharmaceuticals to return production of these essential goods to the United States," Trump told House Republicans conference (via C-Span.org). "They left us and went to Taiwan; we want them to come back. We do not want to give them billions of dollars like this ridiculous program that Biden has given everybody billions of dollars. They already have billions of dollars. […] They did not need money. They needed an incentive. And the incentive is going to be they [do not want to] pay a 25%, 50% or even a 100% tax."
They left us and went to Taiwan. We want them to come back.
Donald Trump
Trump criticized leading U.S. tech companies, such as Apple, AMD, Broadcom, Nvidia, and Qualcomm, for building their processors at TSMC in Taiwan. He emphasized that the proposed tariffs would leave companies with no choice but to invest in domestic production facilities to avoid high taxes. He also argued that government grants like the CHIPS Act are unnecessary and counterproductive and that companies should use their own resources to build fabs rather than rely on public funding.
However, fabs take years to build, and a leading-edge fab costs tens of billions of dollars. Even if TSMC were to start constructing a sub-2nm-capable fab in the U.S. today, it would come online only in 2028–2029. Assuming that Trump’s administration imposes tariffs on ASICs, CPUs, GPUs, and other types of chips made in Taiwan in the coming weeks, this would make PCs, servers, and smartphones more expensive for companies and individuals in the U.S. immediately, which will hardly serve the U.S. economy well. To avoid this, the administration would need to introduce exemptions, just like it did with China-made graphics cards and motherboards years ago.
Still, tariffs and exemptions are good leverage to make companies like Apple, AMD, Nvidia, and TSMC invest in America and build a significant percentage of their chips in the U.S. For now, TSMC has only one small fab in the U.S. and is building two additional modules. Perhaps the company will have to review its plans for the next four years. Still, chips made in the U.S. are more expensive than chips made in Taiwan.
The proposed tariffs mark a significant shift in U.S. trade policy, signaling an aggressive stance to curb dependence on foreign manufacturing and prioritize domestic production, but it remains to be seen how well this strategy will work.
