This is a big deal US government announcement. It will eliminate as much as 99 percent of tariffs on products imported from Taiwan, particularly advantageous to incoming Taiwanese giant of semiconductor manufacturing, TSMC. The new tariff rate will be reduced to 15%. This amendment is intended to spur additional investment from Taiwanese firms in the American semiconductor ecosystem. Indeed, TSMC is already deep into its expansion plans in the United States. This decision is intended to bolster domestic production capabilities as the world continues to face chip shortages.
TSMC, which is widely known as the leader in the semiconductor industry, has a large manufacturing facility underway in Arizona. This factory makes the semiconductors used in cutting-edge AI chips for US technology giants like Nvidia, Apple and AMD. The U.S. government raised $40 billion in subsidies under the Biden administration to ensure that this factory could be built here. This underscores the importance of government support for increasing domestic semiconductor production.
The new tariff cut granted unique exemptions for Taiwanese semiconductor manufacturers who are making large-scale investments in the U.S. This amendment produces the opposite effect, appearing to facilitate TSMC’s accelerated expansion of operations. The company used the opportunity to speed up its investments in the United States—most notably with the opening of a new U.S. plant in 2024. These investments greatly enhance the U.S. government’s strategy of promoting domestic semiconductor manufacturing. That priority has only become more pressing since the Covid-19 pandemic exposed cracks in our nation’s supply chain.
Throughout the pandemic, TSMC and other members of the semiconductor industry experienced serious chip shortages that emphasized supply chain vulnerabilities. This is not a new issue. It has poured hundreds of billions of dollars into subsidies to shore up the semiconductor industry. The fiscal largess goes beyond TSMC. It puts wind at the backs of other firms facing similar foreshocks as they scramble to stabilize their supply chains and rise to the booming demand for leading-edge chips.
U.S. support to Taiwan is vital. At the same time, the Taiwanese government is supporting companies such as TSMC to the tune of a massive $250 billion in funding. Through this joint investment, the Biden administration partners seek to strengthen America’s comprehensive semiconductor supply chain. It will address the overall competitive landscape, particularly as it relates to competitors such as Intel, which has struggled to produce leading-edge chips for AI uses.
This was not the first time TSMC faced high tariffs on its exports to the U.S. This fraught Trump administration policy made headlines over fears of national security and unfair trade. The administration floated using broader tariffs against the semiconductor industry. This ill-advised move would have blown a hole in the economy and innovation in this critical industry.