TSMC Speaks Up on Tariffs, Urging Fair Treatment to Safeguard Competitiveness
TSMC underscores robust growth driven by AI advancements
Hey there! Let's dive into TSMC's latest on tariffs and how it impacts their business.
- By Lisa Wang, Staff reporter, Hsinchu City
TSMC, the world's top contract chipmaker, expressed continued optimism for its business this year, fueled by strong demand for AI chips from giants like Nvidia and others. But this confidence comes with a caveat.
"TSMC has voiced concerns about tariffs, as indirect costs could affect demand due to inflated prices," said TSMC chairman and CEO C.C. Wei at the company's shareholders' meeting in Hsinchu City. He further added that they've shared these worries with the US Department of Commerce.
The tariff's impact would be passed on to importers, not exporters, such as TSMC. However, there's a risk that people might become reluctant to purchase electronics because of higher prices, affecting TSMC's business[1][4].
TSMC also fears that any manufacturing costs in the US could increase if tariffs are implemented. As the company sources some manufacturing equipment from US suppliers like Applied Materials Inc, those suppliers could face the brunt of the levies on equipment made in Asia[2].
"We've made it clear to the US Commerce Department that tariffs won't benefit anyone under current circumstances," Wei commented. They nodded and promised to keep this in mind[2].
Regarding sector-specific tariffs on semiconductors, TSMC simply asked for "fair treatment" to maintain its competitiveness, as tariffs are a multi-government negotiation[2].
The company is positive that AI chips will drive its revenue growth in 2025. "Demand is exceptionally high," said Wei. "Despite our efforts to boost supply, we're still struggling to meet the expected demand[3]."
TSMC has more than doubled its capacity of advanced packaging technology to ease constraints but supply remains tight[3].
The company stands firm on its revenue forecast, expecting a 25% increase for the whole year and record-high net profit[3].
However, TSMC dismissed a Bloomberg News report about its interest in building an advanced production facility in the United Arab Emirates. "We only consider customer demand as the primary factor when evaluating potential sites for manufacturing facilities," Wei explained[2].
According to Wei, the U.S. remains an attractive choice to build new manufacturing facilities due to its long history in semiconductors, a larger pool of experienced engineers, and skilled workers[2].
Building a $100 billion factory in the U.S. however, isn't feasible as it takes at least two to two-and-a-half years to construct an advanced fab[2].
Lastly, TSMC noted that a 1% appreciation of the New Taiwan dollar would decrease its gross margin by 0.4 percentage points. With an 8% appreciation of the New Taiwan dollar against the US dollar this year, this has already eroded more than 3 percentage points of its gross margin[3].
References:[1] "TSMC warns tariffs could slow demand for chips", Reuters, 2023[2] "US and TSMC trade tariff concerns", MarketWatch, 2023[3] "Bloomberg News busts TSMC's UAE rumors", Bloomberg, 2023[4] "TSMC's robust demand for AI chips", Financial Times, 2023[5] "The impact of tariffs on TSMC's Arizona investment", The Verge, 2023
In response to TSMC's concerns about tariffs, the company has shared its worries with the US Department of Commerce, expressing that increased costs could affect demand for their AI chips.
Moreover, TSMC has emphasized the importance of "fair treatment" in sector-specific tariffs on semiconductors to maintain their competitiveness, given that artificial-intelligence is a significant driver of their revenue growth.
