BREAKINGVIEWS-Chipmaking giants face triple tariff hit

By Robyn Mak

HONG KONG, April 9 (Reuters Breakingviews) - Chipmakers will feel the heat of Donald Trump's tariff rampage. The exemption of semiconductors from the U.S. president's announced levies may not last. What's more, the blow to demand for phones and other consumer electronics will be painful for Taiwan Semiconductor Manufacturing 2330.TW, Samsung Electronics 005930.KS and peers. Surging costs also will disrupt their bold plans to set up factories in the U.S.

That U.S. imports of semiconductors are not subject to reciprocal tariffs is hardly a reprieve for the industry. Speaking on Air Force One on Thursday, Trump warned more levies were on the way and "the [ones on] chips are starting very soon"; in February he suggested the latter could be 25% or higher.

In that scenario, the direct hit on chipmakers like $735 billion TSMC may be limited. The company booked roughly $60 billion, or 70% of sales, last year from North America-based customers such as Apple AAPL.O and Nvidia NVDA.O. But most of the processors they purchase are packaged and assembled into PCs, smartphones and other devices outside the country. The U.S. imported chips worth $82 billion in 2024, less than the $100 billion for computers.

Either way, higher prices for end-products, coupled with a likely recession in the world's largest economy, will weigh on consumer demand. Apple, for instance, manufactures an estimated 85% of its iPhones in China, where exporters face cumulative tariffs over 100%. Little wonder shares of TSMC and South Korea's smartphones-to-semiconductor giant Samsung Electronics shares are down 15% and 10% since Trump unveiled his tariffs. As of Tuesday's close, the duo had shed $117 billion in market value combined.

The third blow to manufacturers like Samsung and TSMC may be the most worrying, however. The costs of setting up factories in the U.S. will rise after Washington's various duties go into effect. Take the lithography machines produced by ASML ASML.AS in the Netherlands. These are vital to making cutting-edge chips and can cost up to $350 million each; Trump's 20% levy on the European Union will mean TSMC, which pledged to invest $100 billion in the U.S., will have to pay tens of millions of dollars extra to bring one into the country.

If costs spiral, Trump's trade war may work against his goal of reviving American manufacturing. Chipmakers will suffer the first blow, however.

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CONTEXT NEWS

Taiwan Semiconductor Manufacturing's shares are down 15%, to T$816 on April 8 since U.S. President Donald Trump unveiled a 32% tariff on imports from Taiwan on April 2.