Taiwan Semiconductor Manufacturing Co. (TSMC) warned that US tariffs on Taiwanese semiconductors could decrease demand for chips and impact its planned investments in Arizona.

The warning was included in a letter dated May 5 to the US Department of Commerce, responding to a US investigation under Section 232 of the Trade Expansion Act of 1962, which may lead to new tariffs on semiconductor imports.

TSMC confirmed the letter but did not disclose further details.

TSMC said that any new import tariffs should not create uncertainties for ongoing semiconductor projects, including its US$65 billion investment in three wafer fabrication facilities in Arizona.

The first facility is operational, the second is nearing completion, and a groundbreaking for the third was recently held.

TSMC also announced an additional US$100 billion investment in Arizona, raising its total planned investment to US$165 billion.

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🔗 Source: Focus Taiwan

🧠 Food for thought

1️⃣ The paradox of tariffs: undermining the very investments they aim to encourage

TSMC’s warning illustrates a key contradiction in current trade policy approaches to semiconductor manufacturing.

The company’s planned $165 billion Arizona investment represents one of the largest foreign manufacturing commitments in U.S. history, designed to create domestic chip production capabilities 1.

Yet the same administration threatening tariffs on Taiwanese semiconductors is simultaneously celebrating these investments, creating a policy contradiction that puts billions in committed capital at risk.

This pattern extends beyond TSMC. South Korea recently announced a $23 billion support package for its semiconductor industry partly in response to U.S. tariff threats 2.

The semiconductor industry’s lengthy planning cycles and massive capital requirements make it particularly vulnerable to policy uncertainty, with facilities costing $10-20 billion and requiring 3-5 years from planning to production.

2️⃣ Semiconductor supply chains remain stubbornly global despite onshoring efforts

TSMC’s letter highlights an uncomfortable reality: despite billions in incentives and investments, many critical semiconductor manufacturing equipment and materials remain unavailable in the U.S. market.

The semiconductor production process typically involves components crossing international borders multiple times, with specialized steps occurring in different countries based on comparative advantages, creating bottlenecks when disrupted by tariffs 3.

This reality is reflected in projected U.S. semiconductor manufacturing workforce shortages, with industry analyses showing a projected shortfall of nearly 70,000 skilled workers by the end of 2025 3.

Even with major investments like TSMC’s Arizona facilities, the complementary specialization between countries remains critical. For example, South Korea’s expertise in memory chips and Taiwan’s in advanced logic supports rather than competes with U.S. semiconductor development 4.

The U.S. semiconductor industry has maintained a trade surplus for approximately 30 years, with exports ranking fourth among all U.S. exports in 2018 at $44 billion, highlighting the success of this global specialization model 5.

3️⃣ Economic impacts extend far beyond chipmakers themselves

Tariffs on semiconductors create ripple effects throughout manufacturing supply chains, with cost implications multiplying as they move downstream.

A Trade Partnership study estimated that previous tariff rounds could result in a net loss of over 400,000 U.S. jobs, with automotive dealerships alone potentially losing between 28,800 to 117,500 positions due to price increases 6.

The automotive sector, which accounts for approximately 10% of the total chip supply chain, faces particularly severe impacts as modern vehicles increasingly rely on semiconductor components for everything from entertainment systems to safety features 6.

Beyond direct manufacturing impacts, the $697 billion semiconductor industry projected for 2025 drives innovation across multiple sectors, with AI chips alone expected to exceed $150 billion in sales next year 7.

Industry analysts project the semiconductor industry to reach a $1 trillion valuation by 2030 with a 7-9% compound annual growth rate from 2025-2030, making stability in trade policy increasingly critical to global economic growth 8.

Recent Taiwan Semiconductor Manufacturing Co. developments

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