Former President Donald Trump reiterated his frustration with Taiwan over the weekend when he appeared on the radio show “The Joe Rogan Experience” and accused Taiwan of stealing the U.S. chip industry.
Trump criticized the US chip law and said he would implement tariffs on chips coming from Taiwan if he is elected president. Such tariffs would affect the world's leading chip builder, Taiwan Semiconductor Manufacturing Companywhose clients include companies such as Nvidia and apple.
Shares of Taiwan Semiconductor Company closed 4.3% lower on Monday.
“You know, Taiwan, they stole our chip business…and they want protection,” Trump said during an appearance on the podcast published Saturday.
Each hyperscaler runs on its own internal chip, including… Amazon, Google and MicrosoftIt is manufactured by a Taiwanese company. UBS analysts estimate that more than 90% of the world's advanced chips are manufactured by Taiwan Semiconductor Corporation. Intel and Samsung are among the companies trying to compete, but have faced a series of setbacks.
Given the broader geopolitical concerns surrounding Taiwan and the threat of a Chinese invasion, pressure has been growing on American companies to build an alternative to Taiwanese semiconductors in the United States.
Intel, which has emerged as a model for the CHIPS Act, has faced many challenges. “We want to build cutting-edge infrastructure here in the United States, and to be honest, from a political standpoint, it shouldn't matter much who builds it,” Stacey Rasgon, an analyst at Bernstein, told CNBC.
Rasgon added that the idea that Taiwan stole our chip industry is “ridiculous.”
Taiwan Semiconductor is waiting to receive nearly $7 billion from the US Commerce Department to build its foundry in Arizona as part of the CHIPES Act. On the company's earnings call two weeks ago, the company's CEO, CC Wei, said its Arizona plant was making progress, and volumes were expected to rise in 2025.
US Commerce Department funds have not yet been allocated to Taiwan Semiconductor or other major semiconductor companies. The funds are expected to be allocated by the end of this year as long as specific milestones are met.
Trump also suggested that foreign companies would not be able to enter the United States and use government funds. “This chip deal is very bad,” he said. “We've put billions of dollars into rich companies to come and borrow money and build chip companies here. They won't give us the good companies anyway.”
Mizuho analysts recently wrote that a Trump victory would be bad for Taiwan Semiconductor. Analysts at Citi debate the extent to which tariffs could increase costs across the chip supply chain. They add that tariffs will not be easy for governments to navigate. “(The tariffs) will require complex audits across thousands of devices, containing a variety of chips,” Citi analysts wrote.
Markets are closely monitoring the risks surrounding Taiwan, given how dependent Silicon Valley is on Taiwanese semiconductor chips. Earlier this summer, when Trump made similar comments about Taiwan, Van Eck Semiconductor Corporation (SMH) lost $675 billion in market value in one week. Taiwan Semiconductor shares fell more than 10%.
US companies that have manufacturing facilities or are in the process of building them, such as Intel, Global Foundries and Texas Instruments, outperformed expectations that if Trump wins, he will favor domestic players.
However, the broader trade war could pose a challenge for this sector as well. “(Under a Trump presidency), there will likely be significant tariffs against China, which, as we've seen before, will provoke a Chinese response as we saw with Micron,” said Patrick Moorhead, CEO of Moor Insights & Strategy and a senior analyst. A technical analyst told CNBC.
But experts warn that if Vice President Kamala Harris wins the election, it won't be “all clear” about the quasi-trade. Some of the harsher export controls on China implemented under the Biden administration have significantly impacted how much Nvidia and other semiconductors can sell in the country. Pre-export controls Nvidia's business in China generated more than 25% of total sales. China now represents less than 10% of Nvidia's revenue.
