Trump's Mexico Tariff Bombshell Worries Taiwan Too... TSMC Shaken [Taiwan Chip News]

Mexico AI Server Supply Chain Hit
TSMC US Factory Expansion Uncertain

The shockwaves of a new protectionist trade policy expected under former President Trump’s re-election are intensifying their impact on the global supply chain. The AI server and semiconductor industries are poised to face a critical turning point amid the dual pressures of Trump’s high tariffs and export controls. Taiwanese semiconductor giants like TSMC, which are pushing to expand production within the U.S. and have AI server manufacturing hubs centered in Mexico, find themselves at the heart of this geopolitical risk.

According to industry sources on the 30th, Donald Trump recently announced on his social media platform, Truth Social, that on his first day in office, he would impose a 25% tariff on all products entering the U.S. from Mexico and Canada. This move effectively nullifies the existing United States-Mexico-Canada Agreement (USMCA) and is expected to deal a fatal blow to the AI server supply chain centered around Mexico. Trump justified the tariff policy as a measure to address issues related to drugs and illegal immigration entering through Mexico.

The industry is focusing on the economic repercussions of this measure on Taiwanese companies that produce servers in Mexico for export to the U.S. Currently, Mexico accounts for about 67.4% of the servers imported by the U.S., serving as a major production base for Taiwanese original equipment manufacturers (OEMs).

Among Taiwanese companies, Wiwynn produces 70% of the servers shipped to North America in Mexico, and Inventec also handles 35% of its total server production there. Foxconn and Wistron also operate large-scale production facilities in Mexico. These companies have supplied AI servers to the U.S. market by leveraging Mexico’s geographic advantages and tariff benefits under trade agreements. Trump’s imposition of high tariffs is expected to hit their AI server supply chains first.

Foxconn’s plan to build the world’s largest GB200 factory in Mexico in collaboration with Nvidia is also expected to face setbacks. Foxconn had planned to start operations early next year, but the tariff risks have cast uncertainty over the continuation of subsequent factory construction. Wistron, too, had aimed to strengthen its production capacity for automotive and graphics processing unit (GPU) servers through a new factory, but this policy change will likely force a revision of those plans.

Trump’s protectionism is also expected to ripple through the semiconductor industry. TSMC is expanding domestic production by establishing a large semiconductor factory in Arizona, but the business environment is becoming complicated due to Trump’s tariff policies and uncertainties surrounding the second phase of semiconductor subsidies.

TSMC plans to mass-produce 4nm and 5nm processes in the first phase of its Arizona plant in the first half of next year, and to produce 3nm processes in the second phase by 2028. However, with Trump mentioning tariff hikes and subsidy cancellations and likely strengthening a hawkish stance on manufacturing, this could significantly impact TSMC’s long-term strategy.

The U.S. Department of Commerce currently leaves open the possibility of TSMC receiving up to $6.6 billion in subsidies, but the detailed conditions are stringent. TSMC must receive at least $1 billion by the end of this year. It must agree to a “value-sharing agreement,” which involves waiving stock buyback rights within five years and sharing excess profits with the U.S. government. Additionally, subsidies are paid based on the progress of factory construction, putting pressure on TSMC to adjust its capital expenditure plans. Such complex support conditions and tariff risks could act as obstacles to TSMC’s expansion in the U.S. market.

The market has raised the possibility that TSMC might temporarily halt equipment orders for facility expansion in 2026 due to geopolitical factors. TSMC has not issued an official statement on this. Partner companies have not yet felt significant impacts. The equipment order plan for 2026 is expected to be finalized in early 2025, at which time a new capital expenditure plan will also be announced. For now, it is considered premature to discuss equipment orders for 2026.

Taiwan Economic Daily News = Compiled by this paper · Reporter In Huizhong / Translation = Asia Economy