[Taiwan Chip News] No Tariff Concerns for TSMC?..."Customers Bear the Costs"

Report Says No Impact on TSMC Even Under Trump 2.0
Stock Prices Weaken Amid Fears of Tariff War Resurgence,
But First Positive Outlook from Foreign Securities Firm

The recent stock price of Taiwan's TSMC, the world's largest foundry (semiconductor contract manufacturer), has been showing weakness. This is due to increased uncertainty, including the possibility of a renewed tariff war following former U.S. President Donald Trump's return to the White House. However, despite this situation, investment bank Morgan Stanley became the first foreign securities firm to issue a positive outlook on TSMC.

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In its latest report, Morgan Stanley explained that TSMC does not need to worry about potential issues such as tariff impositions or margin reductions caused by establishing factories in the U.S. Morgan Stanley maintained a target stock price of 1,330 Taiwan dollars, stating that if such situations arise, TSMC can pass all additional costs onto its customers, thus avoiding direct impact. Morgan Stanley is the first foreign securities firm to state that the arrival of the 'Trump 2.0' era following Trump's election will not affect TSMC.

The Biden administration announced on the 15th (local time) that it would provide incentives to TSMC's Arizona plant under the Semiconductor Support Act. This includes a commitment to produce advanced semiconductors using A16 technology (1.6 nm process, 1 nm = one billionth of a meter) in the U.S.

Morgan Stanley emphasized that this announcement confirms two facts. First, under the Semiconductor Support Act, the U.S. will provide direct funding of up to $6.6 billion (approximately 9.2 trillion KRW) to TSMC's Arizona plant. The U.S. Department of Commerce announced on April 8 that it had signed an initial memorandum of understanding with TSMC and completed the review.

At the same time, through the commitment to produce advanced semiconductors using A16 technology in the U.S., the first of the three factories under construction in Arizona could be fully operational by early next year.

However, Morgan Stanley analyzed that this announcement merely reconfirms existing information and does not imply that TSMC will actively pursue more advanced process technologies in the U.S.

In fact, this A16 process announcement aligns with the press release TSMC issued in April. TSMC stated that its second semiconductor factory in Arizona will adopt the existing advanced 2 nm process and begin production in 2028. The third semiconductor factory plans to introduce the 2 nm or more advanced process and start production before 2030.

Morgan Stanley believes that TSMC can follow its advanced process production plans in line with Taiwan's semiconductor policies. It expects that the A14 (or 1.4 nm) process will be introduced first in Taiwan in 2028 or 2029, and the A16 process will be introduced at the U.S. plant before 2030.

Regarding concerns that TSMC's establishment of U.S. factories might dilute profit margins, Morgan Stanley dismissed worries about profitability, stating that TSMC can pass these costs on to customers. It also reported that among production facility supply chain stakeholders, there is talk that TSMC may accelerate the expansion of its Arizona plant and that the possibility of establishing additional semiconductor factories remains open. The site is designed to accommodate a total of six semiconductor factories.

Morgan Stanley expressed the opinion that even if the U.S. factories lower TSMC's margins in the long term, TSMC's stock price could be positively re-evaluated. This is because it has been confirmed that TSMC can receive $6.6 billion in funding before the inauguration of the Trump second-term administration, and that TSMC can adjust wafer prices to pass the high costs of U.S. production onto customers.

Regarding investors' concerns about potential tariff issues, Morgan Stanley stated, "TSMC already mentioned tariff risks in its earnings announcement last July," and "TSMC management clearly stated at that time that regardless of any tariffs imposed, the final burden would fall on TSMC's customers." Morgan Stanley assessed that the tariff issues during Trump's second term are "not problems faced by TSMC alone."

Taiwan Economic Daily News = Reporter Jang Jingwon / Translation = Asia Economy

※ This article is reprinted based on a strategic partnership between this publication and Taiwan Economic Daily News.