Rough Days For TSMC in US

The world’s largest contract chipmaker, TSMC, seems to be navigating through a minefield in the United States these days.

The firm recently announced investments worth $100 billion in the country — a decision it apparently took to avoid facing tariffs as high as 100% from one its biggest buying nations.

Analysts and experts had long speculated that the massive investment was spurred by tariffs. But just how huge those levies could have been was just confirmed by US President Donald Trump himself.

Also on AF: China Hits Back With 84% Levy, After Trump Doubled US Tariffs

“TSMC, I gave them no money … all I did was say, if you don’t build your plant here, you’re going to pay a big tax,” Trump said, speaking at a public event on Tuesday.

“25, maybe 50, maybe 75, maybe a 100%,” he added.

A 100% levy would have come at a significant cost to TSMC, considering it counts some of the US’s biggest firms as its buyers. Although it may have also been likely to pass on the cost burden of those tariffs to companies such as Apple and Nvidia.

Taiwanese media reported in February that the chipmaker was already prepared to hike the costs of its advanced chipmaking processes by more than 15% to combat the risk of tariffs threatened by US President Donald Trump.

Nevertheless, TSMC’s move garnered mixed responses in Taiwan, with some noting it would help the chipmaker get past Trump’s tariff threats, and others worried about the consequences it would have for the island.

One of the biggest concerns on the island was that TSMC’s expansion in the US would slash the importance of its presence in Taiwan, and make the island increasingly vulnerable to an invasion by China.

Others also pointed out risks associated with giving in to Trump. “Once you agree to blackmail, then there’s no end of it,” Chang-Tai Hsieh, an economist at the University of Chicago’s Booth School of Business, told CNN.

$100 billion fine risk

TSMC has since announced several investments in Taiwan, asserting it remains committed to the island. Taiwanese officials have also clarified that the chipmaker would not be allowed to manufacture its most advanced chips in the US for the time-being.

But the chipmaker now faces fresh trouble in the US — the risk of a $100 billion fine.

According to a Reuters report, the US Department of Commerce has been investigating TSMC’s work for China-based chip designer Sophgo after the firm’s TSMC-made chip matched one found in Huawei’s high-end Ascend 910B artificial intelligence processor.

But Huawei, a company that Washington accuses of busting sanctions and stealing trade secrets – is on a US trade list that restricts it from receiving goods made with US technology.

And because TSMC’s chipmaking equipment includes US technology, the company’s Taiwan factories are within reach of export controls that prevent it from making chips for Huawei, or producing certain advanced chips for any customer in China without a US licence.

Effectively, TSMC’s work for Sophgo could make it liable for penalties of more than $1 billion, Reuters said.

TSMC made nearly three million chips in recent years that matched the design ordered by Sophgo and likely ended up with Huawei, Lennart Heim, an information scientist at US think tank RAND, told Reuters.

Heim said that based on the design, which is for AI applications, TSMC should not have made the chip for a company headquartered in China, especially given the risk that it could be diverted to a restricted entity like Huawei.

Taipei-listed shares of TSMC have tanked more than 7% since the Reuters report on Tuesday. TSMC stock was down nearly 4% on Wednesday, though its fall was smaller than the wider 5.8% losses on the Taiwan Weighted index.

Taiwanese shares overall are down more than 18% since Trump announced his “reciprocal” taxes from the White House lawn last week.

Taiwan’s exports to the US now face additional tariffs of 32%. The tariffs exclude chips, but Trump has said his team is looking at levies on semiconductors.

Meanwhile, it remains unknown how the Trump administration will proceed with TSMC in the matter of its chip sales to Sophgo or when the matter will be resolved. Top officials have said they plan to seek higher penalties for export violations.

Also read:

China Tech Giants ‘Ordered $16 Billion of New Nvidia Chips’

Trump Tariff ‘Medicine’ Triggers Asian Markets Bloodbath

Taiwan Says TSMC Not Allowed to Make 2nm Chips Abroad, For Now

China Fumes as TSMC Begins Producing 4nm Chips in US

TSMC to Cut Off All Chinese AI Clients From Its Advanced Chips

Huawei, SMIC Set to Defy US Sanctions With 5nm Chips: FT

Huawei’s China-Made 7nm Chip ‘Years Behind US’, Raimondo Says

US Chipmaker Fined $500,000 for Chips Sent to China – NYT