The impact of tariffs by the Trump Administration on semiconductors from Taiwan is not cause for alarm, at least not yet, according to one analyst.
President Donald Trump has threatened to hit semiconductor imports with a 25% tariff, with the incentive being to manufacture the chips in the US instead of importing them. This ignores the reality that there aren’t enough fabrication plants in the United States to make all these chips begin with and building them will not be accomplished overnight, expert say.
Beyond the threat, any potential impacts liable to be minimal. “In their purest sense, for a majority of the higher end [companies] in the semiconductor industry, it’s not as big a deal. It’s more just a nuisance that needs to be assessed, managed and obviously monitored. But I don’t think it’s upsetting the fundamental medium or long-range plans of most companies,” said Scott Almassy, US semiconductor lead for PwC.
His argument is that the cost will not be fully passed on to the customer but absorbed by the OEM that buys the chips. Chipmakers like TSMC and GlobalFoundries don’t sell directly to end-users but to OEMs like HPE and Supermicro and can absorb some of the cost.
“I think it will vary by industry,” he said. “Obviously the middle ground would be splitting it 50% with the supplier, 50% to the consumer. I think it’s going to be a calculus that’s going to have to be done by each individual company with where they feel like they are in the value chain, and what kind of pricing power they have.”
Almassy says tariffs will definitely be felt by consumers, more than IT organizations because there are “fewer levers consumers can pull” and fewer actions that consumers can take than enterprises, which are constantly on edge about what they need to do to maintain and grow their business, and what’s around the corner.
The idea behind tariffs is to increase domestic manufacturing, but Almassy notes the United Stated doesn’t have the manufacturing capacity or capability that Taiwan does. TSMC, Samsung, and GlobalFoundries have some fabs here but they are not building the most leading edge technologies.
“Those are all in Taiwan at the moment. Those fabs take years to ramp up right. And then you need the workforce to be able to turn them into profitable factories. It doesn’t have that doesn’t happen overnight either,” he said.
Almassy said it’s not possible to predict when the tariffs will hit because they haven’t been implemented yet. “The magnitude of it remains to be seen, based on the duration and the overall macro connection and how things play out more broadly,” he said.
Still, others say tariffs would harm the industry. “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 said in a recent Network World article
Source:: Network World