Relief for Taiwan's chip industry as it escapes Trump's 100% tariff, but anxiety still in the air

Taipei heaved a temporary sigh of relief even as US President Donald Trump said that he would slap a shocking 100 per cent tariff on imports of semiconductors, the crucial components that form the backbone of Taiwan's economy.

- Yip Wai Yee

TAIPEI -

That is because companies that commit to making chips in the US would be exempted, which would mean that Taiwan Semiconductor Manufacturing Company (TSMC), the crown jewel of the island's tech industry, would likely be spared.

The firm, which is the world's largest contract manufacturer of chips, has so far pledged US$165 billion (S$212 billion) in investment to build six semiconductor plants in the US state of Arizona.

But while things don't look too dire now, the impact of the tariff on Taiwan's chip industry could yet be far-reaching.

Large clients of smaller Taiwanese chip suppliers could demand that they move some of their production to the US to sidestep the punishing duties.

This could lead to a decline in Taiwan-based chip production and affect the island's position as a key part of the global tech supply chain, say analysts.

And while Mr Trump's latest tariff measure is part of a push to boost domestic chip manufacturing, it could lead to higher prices of electronic devices such as smartphones, which could in turn depress demand for such devices and the chips that drive them.

Such an outcome would mean uncertainty for Taiwan's semiconductor industry.

Still, on Aug 7, TSMC stocks surged nearly 5 per cent to close at a record high of NT$1,180 (S$51), reflecting investor confidence in the wake of Mr Trump's announcement.

Officials in Taiwan were also cautiously optimistic.