Secondly, tariffs can make foreign companies start to produce tokens in the US if they become cheaper than doing it elsewhere. However, higher American labor costs and the lack of a sophisticated semiconductor supply chain means transferring production there, if not decades, and there is no guarantee that such US facilities will be profitable. In the face of American tariffs, it can be more sensible for Taiwanese companies such as TSMC, it simply moves production to a third country to avoid paying them.
But the Trump administration could expand the tariffs to all countries, effectively making production in the US the only real alternative. This can alternatively apply tariffs for all end products containing Taiwanese chips.
This last idea would be a significant disturbance in the semiconductor industry. A single smartphone may have dozens of systems responsible for the scope of various functions; The car may potentially have thousands. When wondering which of them have components from Taiwan, how many components should be taxed and how challenging it can be to find substitute products, would bring a bulky burden for end companies.
Semiconductor companies are probably not prepared for such a scenario, especially since their products have been saved tariffs in the past. “Industry around the world has never dealt with such chip tariffs before,” says a confidential semiconductor industry based in Taiwanese, who publishes public comments under the pseudonym of HSU Mei-Hu. “This is theoretically possible, but almost impossible in practice.”
Politics would force companies such as Apple to ask each of their suppliers about the costs of many types of systems he uses, only to determine the right amount of tariffs to declare. “And after announcing, how does it check this customs? If I just put down a random value, where would it come from? “Hsu speaks.
Biden administration previously discussed the apply of component tariffs against Chinese squirrel producers to weaken the semiconductor industry of this country and to protect US national security. But one of the main arguments against this idea was that it would be challenging to logistically implementing, says Miller.
Miller claims that this time in Washington, component tariffs are being considered again, but it would be even more challenging to enforce them on the Taiwan import of chips, because they play a much broader and more crucial role than Chinese systems. “If you were worried about the administrative complexity of the component tariffs only in Vis-Vis China, you should be even more concerned about the administrative complexity of Vis-vis Taiwan,” he says.
The greatest losers
TSMC may lose less of potential American tariffs than other companies due to its unparalleled weight in the industry. TSMC currently produces about 90 percent of the most advanced systems around the world, and its production lines work with full capacity. If Trump raises the tariffs, which forces TSMC to escalate prices, the company may lose some orders for competitors, but experts say that this is not really a massive problem.
But it will probably be challenging to find alternatives quickly. Although companies such as Samsung and Intel have achieved to some extent comparable knowledge in the production of chips, it would be time consuming, costly and risky to carry mature production processes from TSMC factories. So instead of going to another chip manufacturer, American companies, such as Apple and Nvidia, will probably continue to take the bill for TSMC products and finally transfer higher costs to their clients.