With Taiwan Semiconductor Manufacturing Company (TSMC) chairman C. C. Wei promising to carry through overseas expansion plans regardless of the next US President, those securing TSMC's production capacities in its Arizona fab will gain some peace of mind amid uncertainties of a renewed tariff war threatened by Donald Trump.
UMC, set to produce 12nm chips in Intel's fabs starting from 2027, and GlobalFoundries (GF) along with other smaller fabs producing mature chips, may benefit from the potential 60% tariffs imposed on Chinese chips. However, the recent decline in semiconductor company share prices across the board following recent news events calls for a return to rationalism.
Share prices of major semiconductor companies plummeted after US President Joe Biden decided not to seek re-election in the 2024 presidential election, as the industry faces new uncertainties amid Trump's increasing support following his survival of an assassination attempt.
KGI Securities chairman Hsu Daw-yi stated at a collaboration ceremony with UBS Partner on July 22 in Taipei, "The semiconductor companies' fundamentals are sound, and the election rhetoric is only a blip to the market." Tony Chen, director of the Client Portfolio Manager Department at UBS Asset Management (Taiwan) Ltd., added, "Artificial intelligence (AI) still has high growth potential, despite short-term volatility due to the impact of recent news events."
TSMC's CFO Wendell Huang acknowledged that phase 1 of the Arizona fab and phase 1 of the Kumamoto fab will start production in 2025, expecting dilution of gross margins by overseas production costs between 2-3 percentage points in the next several years. TSMC's gross margin stood at 53.1% in the second quarter and was projected to reach 53.5-55.5% in the third quarter.
If extra tariffs were to be imposed on imported chips after the presidential election, it would likely be well into 2025. If TSMC's mass production plan for Phase 1 Arizona is implemented on schedule, the first customers will benefit.
Apple stands to gain, as its announcement of having its chips made in TSMC Arizona to be packaged by Amkor in the United States suggests foresight. However, the capacity of TSMC Arizona is only a fraction of that in Taiwan. Although Apple will source 1/3 of the capacity of TSMC Arizona, it also purchases the most advanced chips (2nm and 3nm) from TSMC's production sites in Taiwan.
TSMC is set to start mass production of 3nm/4nm chips at the Arizona Fab, with AMD and Nvidia among the first customers.
Trump's tariff threat might bring business to Intel Foundry and Samsung's foundry in Texas, but this depends on customer trust in these integrated device manufacturers (IDM). Intel is currently addressing glitches in its Reptar gaming CPU.
TSMC's 3nm process contributes 15% of its total revenues, with high-performance computing accounting for more than half of its total sales. Since TSMC produces its most advanced chips in Taiwan, the costs of potential import tariffs imposed by the United States government would likely be shouldered by its American customers.
In conclusion, only a few American customers with access to the limited capacities at the Arizona fab may benefit from a possible tariff war on chips.
