Secondly, rates can only provide foreign companies to produce chips in the US if it becomes cheaper than to do it somewhere else. But higher American labor costs and the lack of an advanced semiconductor supply chain in the country means moving production there will take years, if not decades, and there is little guarantee that such American outdoor posts will be profitable. Faced with American rates, it could be more logical for Taiwanese companies such as TSMC to easily move production to a third country to prevent them from being paid.
But the Trump government could choose to expand the rates to all countries, which means that production in the US is effectively the only feasible alternative. It can apply the rates alternatively to all end products that contain Taiwanese chips.
The last idea would be a significant disruption of the semiconductor industry. A single smartphone can have dozens of chips that are responsible for a series of different functions; A car may have thousands. Finding out which of them have components from Taiwan, how many those components must be burdened and how difficult it could be to find replacement products, would put a heavy burden on end product companies.
Semi -conductor companies are probably not prepared for such a scenario, especially since their products are usually saved from rates in the past. “Industry around the world has never tackled such chip rates for before,” says an insider-based semiconductor industry that publishes public comments under the alias HSU Mei-Hu. “It is theoretically possible, but almost impossible in practice.”
The policy would force companies such as Apple to ask all their suppliers about the costs of the many types of chips it uses, only to determine the correct amount of rates. “And after it has been explained, how does customs inspect it? If I just put down a random value, how would customs know? “Says HSU.
The Biden administration had previously discussed with the help of component rates against Chinese chip makers to weaken the semiconductor industry of that country and to protect US national security. But one of the most important arguments against the idea was that logistics would be difficult to implement, says Miller.
Miller says that this time component rates are definitely considered in Washington, but it would be even more challenging to force them on Taiwanese chip import because they play a much wider and more important role than Chinese chips. “If you were worried about the administrative complexity of component tariffs exclusively fish-á-vis China, you should be even more concerned about the administrative complexity of fish-vis Taiwan,” he says.
Biggest losers
TSMC will lose less of potential American rates than other companies because of the unparalleled weight in the industry. TSMC currently makes around 90 percent of the most advanced chips worldwide and the production lines are at full capacity. If Trump increases rates and forces TSMC to increase its prices, the company could lose some orders to competitors, but experts say that that is not really a great concern.
But it will probably be difficult for TSMC customers to quickly find alternatives. Although companies such as Samsung and Intel have reached a similar know-how to a certain extent in high-end chip production, it would be time-consuming, pricey and risky to relocate adult production processes from TSMC factories. So instead of going for another chip maker, American companies such as Apple and Nvidia will probably continue to pay the bill for TSMC products and ultimately pass on the higher costs to their customers.
