Former president Donald Trump expressed his frustration with Taiwan over the weekend when he appeared on the Joe Rogan Experience podcast and accused the country of stealing America’s chip industry.
Trump criticized the US CHIPS Act and said he would implement tariffs on chips from Taiwan if elected president. The tariff will affect the global leader in chip building, Taiwan Semiconductor Manufacturing Companywhose customers include companies like Nvidia and Apple.
Shares of Taiwan Semiconductor closed down 4.3% on Monday.
“You know, Taiwan, they stole our chip business … and they want protection,” Trump said during the appearance. The podcast was published on Saturday afternoon.
Every hyperscaler, like Amazon, Google and Microsoftworking on chips in-house is fabbing with Taiwanese companies. UBS analysts estimate that more than 90 percent of the world’s advanced chips are produced by TSMC. Intel and Samsung are among the companies that are trying to compete but have had some setbacks.
Due to wider geopolitical concerns surrounding Taiwan and the risk of a Chinese invasion, pressure is mounting on US companies to create alternatives to TSMC in the US.
Intel, which has emerged as the poster child for the US CHIPS Act, has faced many challenges. “We want to build the best infrastructure in the U.S., and frankly, from a policy standpoint, it shouldn’t matter at all who builds it,” Bernstein analyst Stacy Rasgon told CNBC.
Rasgon added that the idea that Taiwan has stolen our chip industry is “ridiculous.”
A Taiwanese semiconductor manufacturing company will receive nearly $7 billion from the U.S. Department of Commerce to build an Arizona foundry as part of the CHIPS Act. In the company’s earnings call two weeks ago, TSMC CEO CC Wei said that the Arizona plant is on track, with volumes expected to increase by 2025.
US Department of Commerce funds have not been allocated to TSMC or other major semiconductor companies. Sources said funds will be allocated later this year as long as certain milestones are met.
Trump also suggested that foreign companies cannot enter the US and use government money. “The chip deal is really bad,” he said. “We put up a billion dollars for rich companies to come and borrow money and build a chip company here. They will not give us a good company anyway.”
Mizuho analysts recently wrote that a Trump win would be bad for Taiwan Semiconductor. Analysts at Citi debate how much the tariffs could increase costs in the chip supply chain. He added that tariffs would not be easy for the government to implement. “(Tariffs) require complex audits across thousands of devices, which contain multiple chips,” Citi analysts wrote.
The market has been monitoring the risks surrounding Taiwan, due to Silicon Valley’s dependence on TSMC chips. Earlier this summer, when Trump made similar comments about Taiwan, the SMH ETF lost $675 billion in market cap in one week. TSMC fell over 10%.
US companies that have fabs or are in the process of building them, such as Intel, Global Foundries and Texas Instruments, exceed expectations that if Trump wins, they will favor domestic players.
However, the broader trade war could also challenge the sector. “(Under the Trump presidency), there is the potential for large tariffs against China, which, as we have seen before, will cause a reaction from China as we saw with Micron,” said Patrick Moorhead, CEO of Moor Insights & Strategy and top-ranked technology analyst. told CNBC.
But experts warn that if Vice President Kamala Harris wins the election, it is not “all clear” for semi-trade. Some of China’s toughest export controls implemented under the Biden administration have dramatically affected how much Nvidia and other semiconductors can sell to the country. Controlling for pre-exports, Nvidia’s China business accounts for more than 25 percent of total sales. China now accounts for less than 10% of Nvidia’s revenue.
