Taiwanese manufacturers are facing a second wave of supply chain reallocation challenges as they grapple with a precarious trade environment triggered by the re-election of former US president Donald Trump. His victory last week has created jitters among local companies in the global supply chain, with executives scrambling to hasten the transfer of production out of China. Trump threatens to impose a universal 10 percent tariff on imports with a 60 percent tariff on goods from China amid an escalating trade dispute between Washington and Beijing. He also said he could make Taiwan pay for US protection.
Taiwanese companies have been taking precautions to allocate more production to North America or Southeast Asia to meet customers’ requests to avoid any risks from geopolitical tensions. Large-scale manufacturers plan to pass on the additional costs, including higher import tariffs, to customers. However, the companies, particularly those in the semiconductor sector, need to safeguard their technological advantage while rebalancing production.
Taiwan Semiconductor Manufacturing Co (TSMC) has come under the public spotlight lately due to speculation that the world’s largest contract chipmaker might be under pressure to move 2-nanometer chip manufacturing to the US earlier than planned, as Washington aims to build up its advanced technology capacity amid cross-strait tensions. That speculation raises concern that Taiwan could lose its competitive edge in offering the most advanced semiconductor technologies. TSMC did not plan to make 2-nanometer chips at its Arizona fab before 2028 based on its overseas manufacturing road map, and to comply with Taiwanese regulations. The chipmaker is only allowed to make chips using one-generation older technology overseas than it uses domestically. That means TSMC has to ramp up 1.4-nanometer technology from its local fabs prior to making 2-nanometer chips in the US.
Chip packers and testers follow their customers. ASE Technology Holding Co’s US subsidiary, ISE Labs Inc, on Friday unveiled its latest land acquisition in Tonala, Mexico, with the goal of expanding its global footprint to increase ASE’s presence in North America. ISE’s latest move followed its July announcement of expanding capacity in San Jose, California, targeting artificial intelligence (AI) and high-performance computing business. ASE, based in Kaohsiung, is the world’s biggest chip packager.
Trump’s re-election has created uncertainty throughout the electronics supply chain. For the first time in about two decades, Asustek Computer Inc, the world’s No. 5 notebook computer vendor, is building a server production line in the US to secure customers’ orders. Asustek, like its global peers HP Inc and Apple Inc, farm out production to electronics manufacturing service providers. The new production line is to open by the end of this year. Server assemblers Wistron Corp, Quanta Computer Inc and Inventec Corp — all of which are partners of US AI chip giant Nvidia Inc — have announced new investments in the US or Mexico. Wistron’s board of directors approved a US$72 million investment in new capacity expansion in Texas, US$81 million in Mexico and US$40 million in India.
Taiwanese manufacturers have close partnerships with US customers, relationships that are heavily influencing local manufacturers’ investments and production site selection amid the changing US political landscape and Washington’s expected trade policies. Any wrong decision could harm the companies’ competitiveness and Taiwan’s economy, given that the US accounted for 24.1 percent of Taiwan’s exports in the first nine months of this year, the highest in 25 years. It is essential for private businesses and the government to work together to smoothly transfer production, especially for smaller-scale companies to minimize the effects on exports and the economy.
Trying to force a partnership between Taiwan Semiconductor Manufacturing Co (TSMC) and Intel Corp would be a wildly complex ordeal. Already, the reported request from the Trump administration for TSMC to take a controlling stake in Intel’s US factories is facing valid questions about feasibility from all sides. Washington would likely not support a foreign company operating Intel’s domestic factories, Reuters reported — just look at how that is going over in the steel sector. Meanwhile, many in Taiwan are concerned about the company being forced to transfer its bleeding-edge tech capabilities and give up its strategic advantage. This is especially
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