Trump Tariffs Intel TSMC Deal Sparks Chip Industry Shift

Insights | 02-06-2025 | By Robin Mitchell

While the idea of reshoring manufacturing has long appealed to politicians and the public alike, the tools used to achieve this goal matter greatly. In recent years, tariffs have re-emerged as a favoured instrument of economic pressure, particularly under President Trump’s administration. But are they truly effective in a globalised economy where supply chains stretch across continents?

Key Takeaways:

  • TSMC and Intel are reportedly forming a strategic partnership to sidestep US tariffs on imported semiconductors, with TSMC potentially taking a 20% stake in Intel.
  • TSMC's US investments now exceed $160 billion, with its Arizona plant playing a key role in Apple's chip supply chain and broader American manufacturing resilience.
  • Tariffs on semiconductors could severely disrupt supply chains by inflating costs and triggering retaliatory trade actions, particularly in sectors reliant on rare earth minerals and precision manufacturing.
  • While partnerships offer tactical solutions, experts suggest long-term industrial policy and global cooperation may be more effective at supporting sustainable semiconductor production.

What historical lessons do tariffs offer? How are they impacting modern industries like semiconductors? Could strategic partnerships, like the one reportedly forming between TSMC and Intel, offer a viable workaround to this economically disruptive policy?

The Problem With Tariffs

The recent tariffs introduced by President Trump can only be described as pure idiocy—an attempt to address a complex issue with an outdated and counterproductive tool. While the goal of bringing manufacturing back to domestic shores for both economic and national security reasons may seem logical, using tariffs as a blunt instrument to achieve that goal is nothing short of stupidity. It's akin to trying to fix a car engine by hitting it with a sledgehammer. Sure, you'll get some kind of result, but it's not the one you're hoping for.

Tariffs have a long and disastrous history. One only needs to look at the Great Depression to see how tariffs can worsen an already fragile economy. The Smoot-Hawley Tariff Act of 1930, which imposed steep tariffs on hundreds of goods, led to retaliation from other countries, shrinking global trade and worsening the economic downturn. The lesson from history couldn't be clearer: tariffs don't work in the long run, and they create more problems than they solve.

Tariffs in the Globalised Tech Economy

In today's world, especially in the tech sector, tariffs are even more absurd. Modern products, particularly electronics, are no longer made in a single country. The global supply chain is a complex web of resources, manufacturing hubs, and logistical networks. The moment a tariff is imposed, trade wars inevitably follow, and the ripple effects are far-reaching. Rare earth minerals, crucial for everything from smartphones to electric vehicles, are mostly sourced from countries like China. A tariff or trade war could quickly escalate to a point where these vital supplies are cut off, crippling industries and leading to shortages.

The same goes for pharmaceuticals—an area where most nations are dependent on foreign production. A trade war could result in critical medications becoming scarce or even unavailable. And let's not forget the consumer. At the end of the day, tariffs don't hurt corporations; they hit the people who can least afford it. Prices go up, product availability goes down, and the economic burden shifts to the average consumer.

The global economy today is interconnected in a way that's not just a matter of convenience—it's a necessity. Cutting off that connectivity with tariffs is a shortsighted, misguided approach that ignores the realities of modern manufacturing and trade.

TSMC and Intel Reportedly Forming Partnership to Dodge Trump's Tariffs

Taiwan Semiconductor Manufacturing Co. (TSMC) and Intel are reportedly looking to strike a deal that could sidestep the tariffs recently imposed by the US government. This strategic partnership, which hasn't been officially announced yet, would see TSMC acquiring a 20% stake in Intel while also sharing manufacturing techniques and helping Intel's workforce get up to speed with some of the best practices in semiconductor production.

The decision aligns with broader strategic interests. Reports suggest that TSMC may also assist in managing Intel's chip-making facilities in the US, a move designed to streamline production efficiency and avoid direct tariff exposure. This includes potential shared control and operational alignment at sites receiving substantial subsidies under the CHIPS and Science Act.

A Tactical Response to US Trade Policy

According to The Information, TSMC's move is largely about circumventing the 25% tariff on imported semiconductors that's set to kick in this April. By aligning with Intel, TSMC can keep supplying US companies without taking a hit from these unnecessary and counterproductive tariffs.

TSMC's involvement is part of a larger commitment to expand its US presence. The firm recently confirmed plans to invest up to $165 billion into domestic semiconductor infrastructure, with a significant portion allocated to its Arizona facility. This expansion is not just about circumventing tariffs; it's a long-term strategic shift towards regional supply resilience and operational autonomy.

Intel, on the other hand, benefits from TSMC's superior manufacturing capabilities, as it's no secret that Intel has struggled to stay ahead in the semiconductor race in recent years. Partnering with a company like TSMC, which has consistently delivered cutting-edge chips, gives Intel the opportunity to learn from the best in the business. 

Leveraging TSMC Expertise to Bolster US Chip Competitiveness

This collaboration could also help Intel address recent challenges around yield rates and delayed process nodes. With access to TSMC's manufacturing methodologies, including its industry-leading 3nm process, Intel stands to regain competitive footing while reinforcing domestic chip production as geopolitical pressures intensify.

Furthermore, TSMC is reportedly investing an additional $100 billion in its semiconductor manufacturing efforts, including expanding its US footprint with a facility in Phoenix. This plant will focus on making Apple's A16 processor for iPhones, a move that's likely to be incentivised by government subsidies. While the details of the Intel partnership aren't set in stone, it's clear TSMC is doubling down on its role in the US semiconductor market.

This increased footprint has earned praise from political figures across party lines, including Donald Trump, who acknowledged TSMC’s investment as a step towards rebuilding American manufacturing capacity. However, political support remains inconsistent, with ongoing debate over the efficacy and transparency of CHIPS Act allocations.

Could These Partnerships Help Semiconductor Industries?

While the idea of Intel and TSMC teaming up to sidestep Trump's tariffs is certainly noteworthy, it's far from the real solution the semiconductor industry needs. These partnerships may offer some short-term relief, but the scale of the tariffs and the current global economic instability are far too much for businesses to respond to in any meaningful way. This isn't something that can be fixed with a partnership or two; it's a problem of systemic proportions.

The complexity of the electronics industry means that companies can't just pivot overnight. It could take decades for businesses to adapt to this new, tariff-heavy reality. The global supply chain isn't something that can be rearranged on a whim. And even if there is a shift in political power after Trump, it's likely these tariffs will be erased—or at least significantly reduced—leaving companies to look back on a few years of economic damage for no real reason.

The worst part? The damage won't just be limited to the tech industry. The increased cost of importing products into the US is already a recipe for disaster. As prices rise, component shortages could worsen, and the grey market could expand rapidly as suppliers search for cheaper alternatives inside the US. This only compounds the original problem of reduced access to critical components, which could stifle innovation even further.

Will these tariffs encourage US businesses to ramp up production? Maybe. The timeline for any meaningful shift is simply too long. It's wishful thinking to believe the industry can adapt fast enough to make a difference. Ultimately, all the tariffs are going to do is slow down technological advancement and hurt consumers, all in the name of a strategy that could very well be reversed once the political landscape changes.

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By Robin Mitchell

Robin Mitchell is an electronic engineer who has been involved in electronics since the age of 13. After completing a BEng at the University of Warwick, Robin moved into the field of online content creation, developing articles, news pieces, and projects aimed at professionals and makers alike. Currently, Robin runs a small electronics business, MitchElectronics, which produces educational kits and resources.