President Donald Trump continues to use tariffs like a club to get his way, and is threatening to place tariffs on computer chips made in Taiwan, warning the additional charges could reach as high as 100%.
In particular, he is threatening to place tariffs on chips made by TSMC, the world’s largest chip manufacturer.
“In the very near future, we’re 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 said in a speech to Republicans last week.
“They left us and went to Taiwan and we want them to come back,” Trump stated. But in many cases, TSMC’s largest customers never made their own chips in the first place, most notably Nvidia and Apple.
TSMC is building a factory in Arizona, but that factory will take time to complete and will not use TSMC’s most cutting-edge manufacturing process. Its best manufacturing equipment will remain in Taiwan.
The impact of tariffs on the industry would be negative, experts say
“The tech industry is a global industry, and as we saw during Trump’s first term, if you place restrictions on any part of the value chain, you impact the entire value chain in one way or another. Between Trump’s threats and [Xi Jinping, China’s president] threats [referring to the restriction of rare earth materials], the tech industry could be in for a very rough ride, not to mention the US and global economies,” said Jim McGregor, principal analyst with Tirias Research.
The problem with tariffs is that in the end, the tariffed company passes the cost of them along and the customer pays ultimately them. Patrick Moorhead, president of Moor Insights & Strategies, said the tariffs would more than likely mean that AMD, Nvidia, Qualcomm, Apple, Broadcom and Marvell costs would increase.
“They would attempt to pass that onto their customers like AWS, Microsoft, Google, Dell, HPE, HP, Cisco, Apple, and Lenovo. This would likely lead to in a price increase of the end product,” he said.
Moorhead thinks there will be ”severe pushback” on the part of TSMC customers and adds that based on how Trump operated in his last term, that there will be a negotiation, and it will go away.
“Trump wants more leading-edge chips manufactured in the US. The goal is to add jobs and tax revenue and also limit risk of a possible Taiwan invasion by China. Diversified supply chains are smart and motivating TSMC to invest in more US manufacturing via tariffs could be effective. I do believe that Intel will see a lot of business from this as they are making the biggest US investments,” he said.
Bob O’Donnell, president and chief analyst with TECHnalysis, echoes this sentiment. “Because of this massive negative impact, I seriously doubt that the Trump administration would really enforce these. Instead, I hope we’ll see encouragements to build more chips in the US, but that’s a multi-year process,” he said.
Source:: Network World