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Mint
9 hours ago
- Business
- Mint
Semiconductor tariffs will be costly. A better way to deal with China.
The White House may be forced to recalibrate its tariff strategy in the face of judicial pushback. But it is also considering issuing semiconductor tariffs resting on national security concerns under Section 232, a legal authority that likely won't be restrained by the courts. That would be expensive. The U.S. consumes several hundred billion dollars of chips each year, most of which are at least partly manufactured abroad. If the Trump administration imposes expansive tariffs on semiconductors, it would raise costs for America's biggest tech firms and slow investment in chip-dependent artificial intelligence data centers. There is an alternative to broad chip tariffs that could achieve Trump's goal of fairer trade and more domestic investment. Striking a semiconductor-focused sectoral agreement with U.S. allies could reduce trade barriers, commit signatories to investing more in the U.S., and oblige them to join action against the largest source of distortions in the chip market: China. Unlike other industries, chip exports don't face tariffs or significant nontrade barriers from U.S. trading partners. U.S. semiconductor firms aren't worried about the fairness of trade with Europe, Japan, South Korea, or Taiwan. The problem—for the U.S. and for its key trading partners—is China. China's state subsidies are distorting the global chip market. Of course the U.S., the European Union, and Japan have also allocated government funds to bolster their semiconductor industries. But China's subsidies are far larger in scale. A study by the Organization for Economic Cooperation and Development found that while many countries support domestic firms with research and development credits or investment incentives, China's subsidy program is unique in that Chinese state funds take direct equity stakes in chip firms, enabling them to survive regardless of whether or not they make money. After more than a decade of Beijing's subsidies, Chinese firms are now a large producer of the low and mid-range chips on which the world's industrial base depends. Leading companies in the U.S., Europe, and Taiwan fear that any new investments or factories they build will be unprofitable as China floods the market with its heavily subsidized alternatives. This has already happened in one corner of the chip market—the production of silicon carbide semiconductors. Wolfspeed, a leading U.S. producer of such chips, is facing significant losses and preparing to file for bankruptcy, The Wall Street Journal reported. Recognition that Chinese subsidies threaten the survival of Western firms has motivated the U.S. and other countries to launch their own incentive programs, such as the 2022 Chips Act. Narrowly tailored, China-specific semiconductor tariffs or other market access restrictions must also be part of the solution. Washington has rightly taken steps to limit China's access to U.S. firms' advanced technology and to prevent the U.S. industrial base from increasing its reliance on Chinese chips, given the security risks such dependence would entail. But these rules restricting transfer of chipmaking equipment to China are tighter than the comparable regulations of other countries, such as Japan and the Netherlands. Firms from those countries have won market share, while also enabling China's technological advances. If U.S. manufacturers can't use cheap Chinese chips for security reasons, but firms from Europe or Japan can, then U.S. companies face a cost-disadvantage. Aligning security and trade regulations governing the use of Chinese chips would level the playing field for U.S. firms—and improve allies' economic security. That is why U.S. chip companies have already endorsed a sectoral agreement to tackle the issues posed by China's subsidies. And yet, limits on trade with China cannot solve the chip industry's staggering reliance on production across East Asia, especially in Taiwan and South Korea. Trump argues that his tariffs can force firms to build more manufacturing capacity in the U.S. High chip tariffs would certainly create this incentive—but at vast cost. If the White House imposes new tariffs on semiconductors, everything from cars to medical devices to data centers will become more expensive. A sectoral agreement could use Trump's tariff threats to achieve binding investment commitments. If countries like Taiwan and South Korea commit to expanding manufacturing in the U.S., they could be guaranteed tariff relief. This would enhance supply chain resilience, without imposing tariffs that counteract the president's AI dominance goals and undermine the domestic manufacturing renaissance he hopes to catalyze. About the author: Chris Miller is author of Chip War: The Fight for the World's Most Critical Technology. Guest commentaries like this one are written by authors outside the Barron's newsroom. They reflect the perspective and opinions of the authors. Submit feedback and commentary pitches to ideas@
Yahoo
05-06-2025
- Business
- Yahoo
US Is Reworking Subsidy Awards to Chipmakers, Lutnick Says
(Bloomberg) -- US Commerce Secretary Howard Lutnick said the Trump administration has been reworking agreements forged with semiconductor makers under the 2022 Chips Act to secure what he called better terms aimed at generating additional domestic investment. ICE Moves to DNA-Test Families Targeted for Deportation with New Contract The Global Struggle to Build Safer Cars NYC Residents Want Safer Streets, Cheaper Housing, Survey Says The Buffalo Architect Fighting for Women in Design Lutnick cited the decision in March by Taiwan Semiconductor Manufacturing Co., a recipient of $6.6 billion in Chips Act grants, to boost its US investment commitment. The company is adding $100 billion to a previous $65 billion pledge, but without any additional funding from the government, Lutnick said. 'Are we renegotiating? Absolutely, for the benefit of the American taxpayer, for sure,' Lutnick said Wednesday at a Senate Appropriations Committee. 'We're getting more value for the same dollars.' The Commerce secretary even suggested the administration may not follow through on some of the planned awards. 'You will see that all the deals are getting better, and the only deals that are not getting done are deals that should have never been done in the first place,' he said. Read: US Chip Grants in Limbo as Lutnick Pushes Bigger Investments (3) Trump has urged Congress to repeal the 2022 Chips and Science Act that was a centerpiece of President Joe Biden's domestic agenda, though Republican and Democratic lawmakers have little desire to revoke a bipartisan law promising $52 billion in subsidies. Lutnick has previously signaled that the Commerce Department might withhold Chips Act grants to press companies to follow in TSMC's footsteps and expand their planned domestic semiconductor projects. During his nearly two-hour appearance before the panel, Lutnick addressed a range of issues essential to the semiconductor industry, including the administration's push to bring to the US more chips-related investment. He defended artificial intelligence deals with the United Arab Emirates unveiled last month during President Donald Trump's trip to the Middle East, saying the accords were crafted to spur complementary levels of spending in the US. The path for those AI agreements in the Gulf was opened by the administration's decision to revoke a regulation launched during President Joe Biden's final week in office that had drawn strenuous objections from US allies and companies including Nvidia Corp. and Oracle Corp. The so-called AI diffusion rule — aimed at denying China access to advanced semiconductors via third parties — would have taken effect last month and created three broad tiers of access for countries seeking AI chips, an approach that Lutnick assailed a 'illogical.' In its place, the Trump team is moving toward negotiating individual deals with countries while maintaining security guarantees designed to prevent Chinese companies from obtaining AI chips. 'Our view is we are going to allow our allies to buy AI chips, provided they're run by an approved American data center operator, and the cloud that touches that data center is an approved American operator,' Lutnick said. Tensions over US efforts to rein in China's tech ambitions have deepened the conflict over trade between the world's two largest economies. Trump and Chinese officials have accused each other of violating the spirit of recent negotiations in Geneva, with leaders in Beijing objecting to American chip export controls and their counterparts in Washington expressing concerns over a crackdown by China on sales of critical minerals. The US has moved to pressure allies against adopting Huawei Technologies Co.'s new Ascend chip, warning that any use risked violating export controls imposed by Washington. The Commerce Department said last month that it was issuing guidance to warn the public about 'the potential consequences of allowing US AI chips to be used for training and inference of Chinese AI models.' Lutnick insisted that China still lacks the capability to produce high volumes of sophisticated semiconductors, a sign that US export controls have limited China's technological progress. He estimated that China could probably produce about 200,000 advanced chips, like the kind used to train artificial-intelligence services or run smartphones, a tiny number compared with the country's demand. 'They say they are making them and they are not,' he said. --With assistance from Jamie Tarabay, Lynn Doan, Peter Elstrom and Debby Wu. (updates with more comments from Lutnick in the fourth paragraph.) 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Globe and Mail
06-03-2025
- Business
- Globe and Mail
Is Taiwan Semi Stock a Buy, Sell, or Hold on Plans to Invest $100 Billion in the U.S.?
Taiwan Semiconductor Manufacturing Company Limited (TSM), the world's largest contract chip maker, is deepening its commitment to U.S. semiconductor production with a $100 billion investment. This move builds on the company's existing $65 billion effort in Phoenix, Arizona, bringing its total U.S. commitment to $165 billion. The expansion includes three new fabrication plants, two advanced packaging facilities, and a major R&D team center. A key driver behind this expansion is the U.S. government's push to localize semiconductor production. President Donald Trump had long advocated for reducing reliance on foreign chipmakers, imposing heavy tariffs on imports to incentivize domestic production. The U.S. government has encouraged this shift through the 2022 Chips Act, offering significant subsidies - though Trump has more recently cast doubt on his support for the legislation. While TSM stock jumped 6% on its $100 billion U.S. expansion news, it's still 18.6% off its YTD high of $226.40. Is this a prime buy-the-dip moment, or should investors stay patient? About Taiwan Semiconductor Stock Nestled in the tech hub of Hsinchu City, Taiwan, Taiwan Semiconductor Manufacturing Company Limited (TSM) reigns as the world's largest integrated circuit foundry. With a market cap of $955.8 billion, it stands as a silent force behind some of the most powerful chips on the planet. Taiwan Semiconductor's dominance extends deep into the artificial intelligence (AI) revolution. AI demands cutting-edge, high-performance chips, and TSMC happens to be one of the few manufacturers capable of delivering them at scale. The stock's performance speaks volumes. Over the past 52 weeks, TSM has soared 25%, leaving the S&P 500 Index's ($SPX) 12.2% gain trailing behind. Over the past six months, the stock climbed 12.8%, roughly doubling the S&P 500's 5.8% rise. TSMC is not just the backbone of AI's future, but the stock is also a bargain currently. Trading at 19.57 times forward earnings with a price/earnings-to-growth (PEG) ratio of 0.59, it is cheaper than both the tech sector medians and its own historical averages. Despite its dominance in advanced chipmaking, TSM stock remains attractively priced. Moreover, the company keeps rewarding shareholders, paying dividends for 20 years. Its quarterly NT$4.50 per share payout continues, with distributions set for April 10 and July 10, 2025. Its annual dividend stands at $2.46 per share, offering a yield of 1.33%, edging past the SPDR S&P 500 ETF Trust's (SPY) 1.21% yield. Taiwan Semiconductor Surpasses Q4 Earnings On Jan. 16, Taiwan Semiconductor delivered record-breaking fiscal Q4 profits, fueled by soaring demand for AI microchips and processors. Its revenue for the quarter surged 38.8% year-over-year to $26.9 billion, surpassing analyst expectations, while EPS climbed 57% from the prior year to $2.24, slightly ahead of Wall Street's $2.20 estimate. High-Performance Computing (HPC), comprising AI and 5G applications, made up 53% of sales - up from 43% last year. TSMC is playing a high-stakes game, navigating U.S. export controls while doubling down on its cutting-edge chipmaking. Advanced nodes drove 74% of Q4 wafer revenue, and with 3nm in full swing and 2nm on the horizon, its tech edge remains sharp. Expanding fabs in Arizona and Japan, TSMC is hedging risks while fueling AI giants like Nvidia (NVDA) and Apple (AAPL). Looking ahead, management expects revenue in the first quarter of fiscal 2025 to range between $25 billion and $25.8 billion, marking a 34.7% annual increase at the midpoint. To fuel its expansion, the company is set to invest heavily, with a capital budget ranging from $38 billion to $42 billion in fiscal 2025. The future looks even brighter. Over the five-year period starting in 2024, RSMC anticipates its long-term revenue growth to approach a 20% CAGR in the U.S. dollar term, driven by its smartphone, HPC, Internet of Things (IoT), and automotive platforms. For the fiscal Q1 of 2025, analysts predict an EPS of $2.03, reflecting a 47.1% year-over-year increase. Looking further ahead, EPS for the current fiscal year is projected to grow by 30.7% from the prior year to $9.20, and rise by another 19.9% to $11.03 in fiscal 2026. What Do Analysts Expect for Taiwan Semi Stock? This rising demand for high-performance AI chips has led to increased orders for TSMC's most advanced production technologies, and Wall Street analysts remain optimistic. Bank of America Securities analyst Brad Lin reaffirmed a 'Buy' rating with a $250 price target, citing improving gross margins driven by price adjustments, better yields, and a favorable product mix. Bernstein's Mark Li maintained a similar stance, setting a $251 target, while Barclays Plc has raised its estimate from $240 to $255, maintaining an "Overweight" rating. Overall, TSM has a solid 'Strong Buy' consensus rating. Among 11 analysts covering the stock, eight advocate a 'Strong Buy,' while two recommend a 'Moderate Buy.' Meanwhile, one suggests a 'Hold.' TSM's average analyst price target of $244.50 represents potential upside of 37.5%, while the Street-high target of $265 suggests that the stock can climb as much as 49.2% from here.
Daily Tribune
04-03-2025
- Business
- Daily Tribune
Trump Announces $165 Billion Semiconductor Investment Deal with TSMC
Former U.S. President Donald Trump announced a $165 billion investment deal with Taiwan Semiconductor Manufacturing Company (TSMC) on Monday, March 3, at the White House. The deal is expected to bolster the U.S. semiconductor industry, create thousands of jobs, and enhance the country's technological standing. 'The most powerful AI chips in the world will be made right here in America,' Trump stated during the announcement. TSMC, one of the world's largest chip manufacturers, is a key supplier for major companies including Intel, Apple, and Nvidia. The agreement aims to strengthen U.S. influence in the semiconductor sector while also reinforcing national security. Expansion Plans in Arizona Although TSMC primarily operates overseas, it has an existing presence in Arizona. Trump confirmed that TSMC's CEO plans to expand operations in the state, with construction set to begin on five state-of-the-art factories dedicated to producing advanced AI chips. 'Semiconductors are the backbone of the 21st-century economy, and really, without semiconductors, there is no economy,' Trump added. Tariffs Influence Business Decisions Commerce Secretary Howard Lutnick explained that while the initial investment discussions began under the Biden administration, Trump's tariffs have played a crucial role in making the U.S. a more attractive location for companies like TSMC. 'They want to be in the greatest market in the world, and they want to avoid the tariffs. If they are not here, they have to suffer,' Lutnick stated. Federal Workforce Reduction Despite the substantial investment in semiconductor manufacturing, Bloomberg reports that the U.S. Chips Program Office, established under the 2022 Chips Act to support domestic semiconductor production, is undergoing downsizing. The office, which employed 140 personnel under the Biden administration, is expected to see a 40% reduction in staff as part of Trump's broader federal workforce reduction efforts. The announcement comes just days after Apple revealed its own $500 billion investment to expand U.S. facilities over the next four years, underscoring a broader trend of increased domestic technology investment. The TSMC deal is set to significantly impact the U.S. semiconductor landscape, boosting innovation and strengthening the nation's position in global technology markets.
Yahoo
23-02-2025
- Business
- Yahoo
Goodbye Intel? Rumors swirl on a potential attempt by two trillion-dollar tech companies to divide Intel into two lines of business
When you buy through links on our articles, Future and its syndication partners may earn a commission. Intel is currently without a CEO and its future looks unclear TSMC and Broadcom are interested in separate areas of the chip maker's business Any deal faces big hurdles - government rules, factory retooling, and political pushback Although it debuted some super-fast AI chips in 2024 in a bid to match its rival AMD, Intel isn't the powerhouse it used to be. While Nvidia is the second-largest company in the world (behind Apple) by market cap, worth $3.4 trillion, and AMD is in 80th place, worth $183.27 billion, Intel, currently without a CEO following Pat Gelsinger's departure in December 2024, is languishing in 173rd place at $102.18 billion - placing it between Rio Tinto and Airbnb. This has led to all sorts of rumors surrounding Intel's future, including speculation it could merge with AMD's former foundry, GlobalFoundries, in a potential multi-billion-dollar deal. But now, perhaps the saddest news of all comes from a new Wall Street Journal report, which says Taiwan Semiconductor Manufacturing Co. (TSMC) and Broadcom are separately considering deals that could split the iconic chipmaker in half. The report claims Broadcom has been "closely examining Intel's chip-design and marketing business", and, according to people familiar with the matter, has, "informally discussed with its advisers making a bid but would likely only do so if it finds a partner for Intel's manufacturing business, the people said.' At the same time, TSMC is considering taking control of Intel's chip plants (either some or all) - a move that was apparently suggested by the Trump administration. However, the WSJ was told by a White House official that the president is 'unlikely to support a deal that involved a foreign entity operating Intel's factories,' so make of that what you will. The WSJ stresses Broadcom and TSMC haven't teamed up to carve Intel in two - these are unrelated possibilities - and all of the talks so far are 'preliminary and largely informal.' There are a couple of hurdles standing in the way of such a deal. The 2022 Chips Act created a $53 billion grant program to boost domestic chip production, with Intel receiving the largest share - up to $7.9 billion. As a condition of the funding, the chipmaker must retain a majority stake in its factories if they are ever spun off into a separate entity. The U.S. government would also have to approve any deal involving TSMC or other investors taking control of Intel's facilities. The WSJ also notes that any deal faces operational issues, noting Intel's factories have largely been set up to produce Intel chips, and the company has only started trying to make chips for external customers in the past few years. "Retooling Intel factories to make advanced chips TSMC's way would be a significant and costly engineering challenge," it adds. Rumor has it that Intel could merge with AMD's former foundry Intel is looking to match AMD as it debuts super-fast AI chips Intel slams Nvidia and AMD, claims chip giants have security flaws Sign in to access your portfolio
