The reciprocal tariffs will take effect on April 9, 2025, with the Trump administration. Currently, there seems to be little chance for other countries to reverse this trend. Although the semiconductor industry has not yet been directly affected by the tariff conflict, industry anxiety continues to rise.
According to chip supply chain operators, TSMC is set to hold an earnings conference on April 17. The company now finds itself in a precarious position.
Compared to Trump's reciprocal tariffs, TSMC's investment in Intel appears minor. If negotiations between Trump and other countries break down, a global economic recession could ensue.
With end-user demand shrinking, major American tech companies including Apple, Intel, AMD, Nvidia, and Qualcomm expect to face pressure on their shipment volumes. TSMC may soon be confronted with its first wave of order adjustments.
Market sources indicate that TSMC's full-year revenue growth forecast in US dollars, initially projected at 25%, might be revised downward. Nevertheless, the advancement of advanced processes and the mandated expansion of American factories continue. Under the burden of substantial capital expenditures, TSMC faces significant challenges, which also adversely affect the semiconductor supply chain.
Trump's firm stance on trade war strategy
Waging a trade war through reciprocal tariffs, Trump continues negotiations with various countries but emphasizes that his administration will not back down. Countries can, however, pursue alternative actions to restore balanced trade relations with the US.
Conflicts between the US and several nations—including China, Europe, Japan, and India—are detailed in the National Trade Estimate Report on Foreign Trade Barriers, released by the United States Trade Representative (USTR). Issues causing dissatisfaction from the Trump administration towards Taiwan include a 17.5% automobile tariff and concerns over imports of American beef and pork.
Supply chain sources state that the two primary objectives behind Trump's imposition of tariffs are to significantly reduce America's national debt while raising tariffs on Taiwan and multiple Southeast Asian countries. This strategy aims to prevent Chinese products from entering the US market through third countries, effectively nullifying the "Taiwan +1, China +1" strategy and forcing supply chains to shift to the US and increase investments there.
However, just as businesses were beginning to recover from pandemic impacts, the looming threat of a trade war could severely damage the US economy, leading to increased corporate costs, potential bankruptcies, and rising prices that would diminish consumer purchasing power. Yet, Trump remains steadfast in his high-tariff stance.
Semiconductor sector under pressure
The expanded restrictions on China's semiconductor industry and pressures on TSMC have tightened the noose around the global semiconductor landscape.
China's tariff policies seem poised for a decisive confrontation with the US, resulting in nearly all electronic products being temporarily halted from shipping to America. If price increases occur, demand for American smartphones and PCs will likely decline, impacting corporate profits.
As the largest market outside of China for the electronics technology supply chain, North America accounts for approximately 40% of Apple's total revenue, while Asus contributes about 25%. Disruptions in shipments and order reductions will quickly ripple through the supply chain, affecting upstream semiconductor manufacturers.
High tariffs threaten not only the prospects of leading brands and chip designers but also put TSMC's other clients at risk of survival, potentially slowing new product development initiatives.
Recently, reports have emerged that major American cloud service providers, such as AWS, are preparing to further cut capital expenditures and adjust AI server orders. This will directly impact Nvidia and the extensive server supply chain, consequently affecting TSMC and its CoWoS advanced packaging partners.
Semiconductor industry representatives state that they have yet to receive clear instructions from TSMC regarding any downward revisions. However, with the tariff threat still looming, the overall outlook for the semiconductor and electronics industries has shifted from optimistic to cautious.
The tariff war will trigger a global supply chain restructuring, benefiting stronger companies while eliminating weaker ones, possibly leading to a wave of mergers and acquisitions.
Article edited by Jerry Chen
