TSMC plays hardball with Trump administration over possible semiconductor tariffs
TSMC hints that if the US imposes tariffs on chips, it might stop building fabs to produce semiconductors in Arizona.
Last month, Commerce Secretary Howard Lutnick appeared on ABC-TV's "This Week" stating that smartphones, computers, chips, and others could be subject to "semiconductor tariffs" that could be imposed in May or June. The world's leading chip manufacturer, TSMC, has sent a message to the White House that tells the president that if he wants chips made in America, he needs to exempt TSMC and other companies that have agreed to build chip manufacturing facilities in the U.S. from tariffs and other import restrictions.
Here's the deal. Only one of TSMC's fabs in Arizona is up and running at this point, which means that most of the company's production comes from the fabs it runs in Taiwan. Thus, any chips it exports to the U.S. will be subject to whatever semiconductor tariff that Trump pulls out of his head at that moment. TSMC is not interested in eating the amount of the additional import tax, but neither does it seem willing to pass the additional costs on to its U.S. customers.
Instead, using the only leverage it has against Trump, TSMC is playing hardball and is hinting that it could make changes to its plans to expand in Arizona. Originally, TSMC agreed to spend $65 billion to build three fabs in the state, and one of them is now producing chips. That leaves two more fabs to be built, along with an additional three that TSMC said it would spend $100 billion to build. But if Trump decides to impose tariffs on foreign-made chips shipped to the U.S., TSMC might decide to slow down, delay, or even cancel the rest of its $165 billion investment.
"To allow investments such as TSMC Arizona to proceed expeditiously, the administration should exempt TSMC Arizona and other companies that have already committed to semiconductor manufacturing projects in the United States from tariffs or other import restrictions."
-TSMC in a letter to the U.S. Commerce Department
TSMC even has a valid reason for making this threat. The foundry produces chips for U.S. tech stars like Apple, AMD, Nvidia, and others. In a letter sent to the U.S. Commerce Department, TSMC wrote, "Lower market demand for our leading US customers' products may consequently reduce demand for TSMC's manufacturing capacity and service onshore."
TSMC has started building its third plant in Arizona, which will manufacture 2nm and A16 (1.6nm) chips using TSMC's best-in-class Super Power Rail backside power delivery. The latter allows silicon wafers to receive power from the back instead of the front of the wafer, where it has to compete for space with transistors and other connections. This will improve the performance of chips made using this technology.
The Arizona facility is not just important to the U.S. to make it more self-sufficent in chip manufacturing, it is also a big deal to TSMC itself. The facility "will ultimately comprise around 30% of TSMC’s total worldwide capacity for 2nm and more advanced technology nodes," the company says. That should allow TSMC to meet U.S. semiconductor demand from U.S. fabs. As enticing as this sounds to Trump, TSMC hints that it will all go away unless tariffs on semiconductors are dropped.
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