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Keithen Drury, The Motley Fool
Tue, Apr 8, 2025, 4:00 AM 4 min read
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After questions were circling astir U.S. tariff rates, we yet got our answer. On April 2, President Donald Trump announced reciprocal tariff rates, and 1 of the highest was with Taiwan astatine 32%.
This is overmuch higher than the 10% basal complaint that galore countries were deed with, and it acrophobic galore investors due to the fact that astir each high-end chips are purchased from Taiwan Semiconductor (NYSE: TSM). A 32% tariff connected these high-end chips would drastically impact the prices of smartphones, PCs, and, astir importantly, computing hardware utilized to bid artificial quality (AI) models.
This tariff announcement caused Taiwan Semiconductor's banal to tumble 7%. So, is it clip to panic similar the marketplace and merchantability this stock?
Sometimes, that marketplace isn't arsenic astute arsenic we deliberation it is. There's 1 important facet that the header fig of 32% tariffs connected Taiwan leaves out: semiconductors are exempt from the "reciprocal" tariffs. This means that chips from Taiwan Semiconductor (or TSMC) volition beryllium the aforesaid terms adjacent week arsenic they were past week.
While determination could inactive beryllium a tariff announcement focused connected semiconductors astatine a aboriginal date, that would beryllium implicit speculation. Plus, Taiwan Semiconductor is already expanding its U.S. operations. In effect to the 2022 CHIPS Act, Taiwan Semiconductor invested $65 cardinal to physique a fabrication works successful Arizona. In March, TSMC announced an further $100 cardinal concern to physique 3 manufacturing plants, 2 packaging facilities, and 1 probe and improvement center.
Some whitethorn accidental that Trump forced this expansion, but the president of Taiwan and the CEO of Taiwan Semiconductor person some asserted that the enlargement was sparked by request from customers who privation American-made chips. Taiwan Semi's existent American spot accumulation capableness isn't astir enough. It has sold retired accumulation astatine its existing Arizona installation done 2027, truthful it's wide that further concern is needed.
Regardless of whether a semiconductor tariff is yet implemented, TSMC is moving to diversify its planetary footprint, which volition let it to debar tariffs. But with the latest sell-off frenzy, is it really clip to bargain Taiwan Semiconductor banal alternatively of selling it?
Following the important marketplace downturn, TSMC banal is present astir 35% disconnected its all-time highs established successful February. The existent interest with Taiwan Semi's banal is that tariffs volition rise prices connected different cardinal items, which volition origin radical to not acquisition big-ticket items similar smartphones. Additionally, AI hyperscalers whitethorn beryllium a spot much blimpish with their spending, which would wounded different broadside of TSMC's business.
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