Under the Trump administration, they want to bring manufacturing back to the US. Previous administrations have tried that as well, often going with the carrot method to sweeten the deal. Trump, on the other hand, has opted for the stick. By imposing tariffs, it forces companies to move operations to the US. Recently, both the US and Taiwan have struck a new trade deal . Under this deal, Taiwan will invest $250 billion in the US as part of its chipmaking plans.
Taiwan brings chipmaking to US in $250 billion deal
As part of the agreement between both countries , Taiwan is expected to invest at least $250 billion to bring chipmaking to the US. In exchange, the US has agreed to lower its reciprocal tariffs on Taiwan down from 20% to 15%. It will also commit to zero reciprocal tariffs on generic pharmaceuticals and their ingredients, aircraft components, and natural resources.
Speaking to CNBC’s Brian Sullivan, Commerce Secretary Howard Lutnick revealed that TSMC has bought land and is expected to set up shop in Arizona as part of this deal. “They just bought hundreds of acres adjacent to their property. I’ll let them go through with their board and give them time.”
Part of the bigger picture
That being said, TSMC moving some of its production facilities to the US isn’t new. Last year when Trump announced the tariffs, TSMC announced plans to expand its operations in the US . TSMC joins other non-US companies, like Samsung , in building more facilities stateside. By making this move, it would allow TSMC to skirt around the import tariffs had it continued to rely on other countries.
This new trade deal won’t be just to TSMC’s benefit, but also other companies in Taiwan. However, seeing as how TSMC is the world’s largest semiconductor manufacturer, obviously they stand to gain as well.
That being said, while this is good for TSMC, it might not be so good for TSMC’s customers. According to a report from last month, TSMC’s US facilities might not be able to produce what companies like Apple, Qualcomm, and NVIDIA are demanding. Due to Taiwan’s laws, there are restrictions on how advanced overseas operations can be.
This means that while TSMC might produce some chips in the US, it might not be its latest chips. Also, another factor to consider is that building in the US will be more expensive. This is because companies have to invest in setting up shop. They also need to pay local labor wages. All of this adds up to a more expensive product.
So, while TSMC might be able to skirt around tariffs, its customers might end up paying the price.
