The U.S. Threatens TSMC With Up to 100% Tariffs if It Doesn’t Build Its Chip Fabs in Arizona

President Donald Trump refuses to leave TSMC alone. During his election campaign, Trump stated on several occasions that he was determined to take whatever decisions were appropriate for the country he now governs to regain leadership in the semiconductor industry. Until well into the 1980s, the U.S. had some of the most robust companies in the sector, such as Intel, Texas Instruments, IBM and Motorola. However, it gradually ceded control of a market that now lies in Asia’s hands.

TSMC holds a global market share of about 60% today and produces leading-edge chips for many U.S. companies, including Apple, Nvidia, AMD, Broadcom and Qualcomm. The Taiwanese company has factories in the U.S., such as the Phoenix facility, which is about to begin large-scale production of 5 nm integrated circuits at the N4 lithography node. Still, much of the semiconductors it ships to its U.S. customers come from its factories in Taiwan.

Trump wants to end this strategy. He made this statement Jan. 27, a few days after returning to the White House and beginning his second term: “In the near future, we will be placing tariffs on foreign production of computer chips, semiconductors and pharmaceuticals to return production of these goods to the United States. They left us and went to Taiwan, which is about 90% of the chip business, and we want them to come back. We don't want to give them billions of dollars like this ridiculous program Biden has. They already have billions. They need an incentive, and they will not want to pay a tax. We’ll put a 50% tariff, 75%, even 100%.”

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Tariffs of Up to 100% on TSMC Remain on the Table

The uproar caused by the U.S. government’s tariff strategy last week reached unprecedented levels. However, Trump hasn’t shifted his stance on integrated circuits in general or TSMC in particular. His latest statement during a National Republican Congressional Committee event puts TSMC back in the spotlight, even as it plans to build several more plants in Arizona in the medium term.

“TSMC, I gave them no money, great company, most powerful in the world, biggest chip company in the world,” Trump said at the event. “They are spending $200 billion in Arizona building one of the biggest plants in the world. All that without money. All I did is say ‘...if you don’t build your plant here, you are going to pay a big tax. 25, maybe 50, maybe 75, maybe 100%,’” he added. Trump is scoring points by forcing TSMC to set up shop in Phoenix to produce cutting-edge chips in the U.S. in the medium term, comparable to those it already makes in Taiwan.

Trump makes no effort to be polite. His statements—the one in January and this one—directly threaten TSMC. The company’s first plant in Phoenix is about to start producing chips on a large scale, but its plan doesn’t end there. The second fab will run in 2028, producing integrated circuits at 3 and 2 nm nodes. Finally, the third fab will be fully operational by the decade’s end, producing chips at the 2 nm node. In addition, TSMC’s manufacturing infrastructure in Arizona will include two advanced chip encapsulation facilities and a research and development center. At this point, the company seems unlikely to abandon this project.

Image | TSMC

Related | U.S. Tariffs Are Already Affecting Two Companies That Are the Backbone of Taiwan’s Economy: TSMC and Foxconn