TSMC vs. Tariffs: Why the U.S. Can’t Afford to Hurt Its Own Tech Supply Chain

TSMC released its first-quarter earnings on April 17, reporting both revenue and profit growth, with net income surging 60% year-on-year. However, despite the strong results, the company’s U.S.-listed ADRs ended only slightly higher in after-hours trading.

There are a few possible reasons for the lukewarm ADR performance. One is that both the Dow Jones Industrial Average and the Nasdaq closed sharply lower on the same day, making even a slight gain by TSMC noteworthy. Another is that the company’s strong first-quarter results were largely in line with market expectations, and thus already priced in.

Another factor with a potentially greater impact on capital markets was the Trump administration’s anticipated announcement of new import tariffs on semiconductors, originally scheduled for April 16. However, no formal announcement was made as expected. Instead, the message conveyed was that the tariffs “may be implemented within one to two months.”

Because this policy is considered highly significant for the semiconductor and technology sectors, the delay—particularly as of the morning of April 17 in Taiwan—has led to a sense that negative developments have yet to fully materialize. As a result, investors are adopting a cautious stance, and many are opting to stay on the sidelines for now.

Trump’s Semiconductor Tariff Plan Faces Repeated Delays — Three Possible Reasons

According to a document published online by the U.S. Federal Register on April 14, the Department of Commerce has launched a national security investigation into semiconductor imports. The scope of the investigation covers semiconductor components such as silicon wafers, manufacturing equipment, and even downstream products that contain semiconductors. The aim is to introduce import tariffs that would strengthen domestic chip manufacturing capacity and allow the U.S. to gain tighter control over the production of critical semiconductor technologies.

This investigation is being carried out under Section 232 of the Trade Expansion Act of 1962, which grants the president authority to impose tariffs on imports that threaten national security. The proposed tariffs targeting the semiconductor industry have already placed significant pressure on chipmakers and their global supply chains.

Despite the administration’s public insistence on the importance of these measures, the plan has faced repeated delays. There appear to be three main reasons behind the hesitation.

First, implementing tariffs on semiconductors is operationally complex. Semiconductors are typically embedded within electronic end products rather than imported as standalone components. Moreover, given the highly fragmented global supply chain—from wafer fabrication to packaging—it is often difficult to identify the true country of origin, posing serious enforcement challenges for customs authorities.

Second, imposing tariffs on semiconductors would significantly increase costs for virtually all technology companies. Semiconductors are essential components found in almost every modern device, and their cost is not trivial—especially those produced using advanced manufacturing nodes, which command much higher prices. Any tariff applied would therefore translate into a substantial cost burden for importers.

Third, the underlying goal of the tariff initiative is to push suppliers to invest in domestic U.S. production and to encourage semiconductor manufacturers to shift their operations onshore. However, the reality is that the United States currently accounts for only about 10% of global chip production. Most overseas fabs have yet to establish facilities in the U.S., and building new fabs from scratch takes time—at least five years or more. As a result, imposing tariffs prematurely would end up penalizing nearly all players in the supply chain, including major U.S. firms that outsource chip production overseas.

This is the crux of the issue. In terms of mature process nodes, GlobalFoundries is the only major U.S.-based foundry, but it holds just 4% of the global foundry market—and not all of its production is U.S.-based. In the advanced node segment, TSMC commands an overwhelming 92% global market share, while Intel has yet to demonstrate that it can produce chips at this level of sophistication.

In short, any tariff on TSMC would significantly raise costs for U.S. companies.

A Bid to Seize Taiwan’s Chip Leadership—But the U.S.-Taiwan Symbiosis Remains Intact

More importantly, in the field of advanced process nodes, TSMC has no true competitors. There are no alternative suppliers capable of replacing its products. As such, imposing tariffs on TSMC will not magically allow Samsung or Intel to fill the gap—there are simply no viable substitutes. In this context, tariffs become a largely ineffective tool.

Because of its technological leadership and irreplaceability, TSMC is in a position to pass on any additional tariff-related costs to its customers. Yet, since Donald Trump took office, a series of aggressive and at times poorly designed industrial policies—especially his tariff-centric approach—has already led to significant declines in the market capitalization of major U.S. tech companies. From Apple and Microsoft to NVIDIA and Qualcomm, many have seen their stock prices suffer under the weight of rising costs and increased supply chain uncertainty.

The Trump administration may be seeking to impose high tariffs on foreign semiconductor firms, but before any benefits materialize, major U.S. tech companies have already borne the brunt of the fallout. Some have lost as much as 30% of their market capitalization. Even Trump’s financial backers—many of whom are deeply invested in these companies—have suffered heavy losses. As a result, there is growing resistance, even among his own supporters, to the administration’s semiconductor tariff policy.

During his campaign last year, Trump repeatedly accused Taiwan of “stealing America’s semiconductors.” These comments were widely seen as a signal of his intent to target the semiconductor industry—particularly manufacturers in Asia, with Taiwan at the center. In retrospect, many of his subsequent policy moves appear aimed at weakening Taiwan’s position and appropriating its semiconductor advantage.

However, this strategy is now running into serious structural obstacles. What Trump cannot alter is the symbiotic relationship between the U.S. and Taiwanese semiconductor industries—a deeply interdependent ecosystem in which supply chains, intellectual property, and capital investment are intertwined. It is a tightly knit alliance where each side is embedded in the other’s success.

Taiwan’s semiconductor industry is a critical partner to the U.S. high-tech sector—one that cannot be disentangled. America’s most prominent technology companies, from NVIDIA and Broadcom to Qualcomm and AMD, all rely on TSMC for chip fabrication. Even Intel outsources a portion of its production to TSMC. These U.S. giants depend on TSMC’s advanced manufacturing capabilities to bring their products to market globally. The two sides form a tightly integrated supply chain, with upstream and downstream operations woven together. They are mutually dependent, and one cannot function without the other—a true industrial symbiosis.

In this light, President Trump’s punitive measures against the semiconductor industry amount to striking at the very heart of U.S. corporate interests. Every stone he raises ultimately falls on his own foot. Policies crafted in this fashion are bound to be self-defeating and difficult to sustain.

Unfazed by Trump’s Threats, TSMC Holds Firm on Full-Year Guidance

Since the beginning of this year, a flurry of rumors surrounding the semiconductor sector has emerged across U.S. media. Speculation has ranged from a potential joint venture between Intel and TSMC, to a possible merger between UMC and GlobalFoundries, and even reports that TSMC could face fines exceeding $1 billion for alleged violations of export control regulations. The volume and volatility of these reports have contributed significantly to market anxiety.

However, during TSMC’s earnings call yesterday, Chairman Mark Liu (魏哲家) made it unequivocally clear: “We are not currently discussing any joint ventures, technology licensing, transfers, or sharing agreements with other companies.”

Although he did not name specific firms, Liu directly addressed and dispelled the swirling rumors—effectively denying any collaboration or co-investment with Intel.

From tariff threats to orchestrated leaks, Trump appears to be employing a strategy of economic intimidation: using policy as leverage while allies spread market-disrupting rumors to cultivate fear and draw parties to the negotiating table. That strategy, however, is wearing thin.

Looking back at the earnings call, TSMC not only posted a strong first-quarter report—with net profit up 60% year-over-year—but also surprised the market with solid second-quarter projections, defying the usual seasonal slowdown. The company maintained its full-year guidance, forecasting a 24–26% revenue increase, driven by robust demand for its 3nm and 5nm process nodes. “We have seen no meaningful changes in customer orders or behavior,” Liu said.

TSMC’s ability to stay the course despite political pressure is a testament to its technological dominance. It enjoys unmatched fundamentals and an irreplaceable position in the global chip supply chain—a form of structural resilience that allows it to withstand waves of external shocks.

As for its stock price, the muted response is unsurprising. With Trump’s policy signals shifting constantly and no clear tariff timeline announced, investors remain in wait-and-see mode—a natural reaction in such an uncertain policy environment.

Global Semiconductor Supply Chain: Why the Stakes Are So High

TSMC’s position at the heart of the global semiconductor supply chain cannot be overstated. The company is not only the world’s largest contract chipmaker, but also the exclusive manufacturer of the world’s most advanced chips, serving clients such as Apple, NVIDIA, AMD, and Qualcomm. These chips are foundational to everything from smartphones and data centers to AI computing and aerospace defense systems.

The United States has increasingly relied on TSMC’s capacity as domestic advanced manufacturing faltered over the past decade. While the CHIPS and Science Act has spurred investment in U.S.-based fabs, including those by TSMC itself in Arizona, these facilities are years from full-scale production.

At the same time, Japan, another key U.S. ally in the Indo-Pacific tech ecosystem, is also exposed to the ripple effects of Taiwan’s centrality in chip manufacturing. Japanese firms like Tokyo Electron and Advantest, which supply manufacturing equipment to TSMC, are closely watching U.S. tariff developments, knowing that any disruption to TSMC’s production or investment plans could indirectly hit their own bottom lines.

In short, Washington’s efforts to decouple from Chinese tech supply chains must carefully avoid undermining Taiwan-based partners. Blunt instruments like tariffs risk damaging the very alliances and corporate structures that give the United States its current edge in semiconductor innovation and deployment.