Trump s course 100% Semiconductor tax responsibilities, legal persons are instructing mature processes and second-line OEM factories

Regarding the situation of US President Trump's recent announcement that he will raise taxes on US semiconductor product classes up to 100%. The domestic legal person pointed out that although the detailed implementation of the period is still to be announced by the US Department of Commerce (BIS) under Article 232 of the US Trade Extension Act 1962, initial information pointed out that any crystalline foundry factories that already have production bases or undertake investment factories in the US will be expected to be exempted. However, this policy undoubtedly shocks the global semiconductor industry, not only affecting the existing supply chain, but also accelerating the transfer of production capacity and triggering structural inflation.

According to the latest research report of Kaike Securities, the impact of this tax policy on semiconductor industries is broad and profound. First-line wafer foundry manufacturers, such as Intel in the United States, Taiwan's Power in Taiwan and Samsung in South Korea, are expected to receive tax exemptions because they have already had clear development plans in the United States. However, second-line crystalline foundry manufacturers such as Taiwan's Electric Power, the world's advanced and the power supply will be significantly impacted. Even if first-line factories are expected to be exempted, the mature process of production outside the United States may still be affected. It is worth noting that the US GlobalFoundries may benefit from the transfer of mature process orders.

In terms of application, AI-related products are more likely to transfer costs to end consumers due to their high added value. However, consumer electronic products are difficult to absorb rising costs. Judging from Telco's customer structure, US Apple may be the most affected, mainly because its A-series processors use the most advanced processes, but Telco's N3 line in the United States is expected to start investment until 2028, and even iPhone users will find it difficult to fully absorb chip costs. Major U.S. customers such as NVIDIA, Broadcom, Qualcomm and AMD will also face significant cost increases.

In the face of tax pressure, NTU is expected to be forced or accelerated to accelerate its expansion plans in the United States due to customer requirements. This is expected to benefit related equipment suppliers, especially the previous process equipment manufacturers such as the Netherlands ASML. Even if NTU has committed to investing up to US$165 billion in the United States, its total capacity is no more than 10-15% of NTU's current total capacity. In other words, its customers will still be negatively affected in the first-hand process (such as N2/N3) and mature process (more than 7 nanometers).

In addition, the cost of production in the United States is significantly higher than that in Taiwan, which constitutes the biggest challenge for Taiwan's electricity production in the United States. According to rough estimates, the production cost of N4 process in the early stage of the P1 factory in Arizona, the United States is about twice that of Taiwan's Fab 18A. With the increase in yield and bottle removal, the cost gap is expected to narrow to about 45%. If the Arizona factory is expanded to the same size as Taiwan, the gap can be further narrowed to about 27-30%.

The report pointed out that Taiwan Electric clearly stated that the increase in costs should be borne by customers. In contrast, the Telecommunications said it would work closely with customers to reduce the impact, showing a clear strategic difference between the two. Whether the crystalline foundry factory can completely transfer costs will depend on market competition. Nevertheless, it is expected that Telco will fully transfer the tax costs to customers. However, this cost transfer will bring global impact. To smooth the cost pressure in the U.S. market, OEM manufacturers will tend to adjust product prices worldwide, rather than just in the U.S. region. This strategy will inevitably lead to an increase in global structural inflation.