TSMC's U.S. expansion may ease tariff risks: Analysts

Taipei, March 4 (CNA) Taiwan Semiconductor Manufacturing Co.'s (TSMC) newly announced investment in the United States is expected to mitigate potential U.S. tariffs on Taiwanese semiconductor exports and is seen as a more strategic move than being "encouraged" to help Intel, analysts said Tuesday.

U.S. President Donald Trump and TSMC Chairman C.C. Wei (魏哲家) jointly announced at the White House on Monday (local time) that the US$100 billion investment will go toward building three semiconductor fabs, two advanced packaging plants and a research and development center.

The announcement came in the wake of threats by Trump to impose tariffs on semiconductors. In Monday's press conference, Trump said that by TSMC bringing additional direct investment to the U.S., it can avoid the imposition of tariffs.

According to Tony Huang (黃文清), an analyst with Taishin Securities Investment Advisory, Trump's tariff policies have already affected global markets, with a 25 percent tariff on Canadian and Mexican goods and an additional 10 percent on Chinese imports.

The TSMC investment could at least alleviate the immediate risk of tariffs on Taiwanese semiconductors, Huang told CNA, stressing that cost control will be a critical challenge for TSMC moving forward.

However, Alex Huang (黃國偉), an analyst at Mega International Investment Services Corp., expressed concerns that the U.S. expansion could disrupt the supply-demand balance for its Taiwan-based production.

He also said that the cost of building facilities in the U.S. could be as much as four times higher than in Taiwan, potentially impacting TSMC's gross profit margins.

Nevertheless, he said expanding in the U.S. is a more viable option than helping Intel, as TSMC has extensive experience in overseas expansion and strong cost-control capabilities.

Recent reports have suggested that the Trump Administration is pressuring TSMC to help boost Intel's semiconductor manufacturing business thereby enabling the American company to regain its market position.

Meanwhile, Chiu Shih-fang (邱昰芳), an analyst at the Taiwan Institute of Economic Research, said it remains uncertain whether the entire semiconductor supply chain will be required to manufacture in the U.S.

For instance, printed circuit board (PCB) substrate suppliers, which are crucial to packaging technology, may face pressure to relocate, she said.

Given the high costs and operational challenges such a move would entail, Chiu said that most Taiwanese manufacturers would prefer to keep production in Taiwan unless forced to do otherwise by tariffs or regulations.