Trump’s Taiwan tariffs could pack a Pixel 10 price hike after Tensor’s transition to TSMC

The world is not only permeated with, but it depends on technology. From servers to cell phones to TVs and drones, modern technology is built upon a foundation of silicon microchips. Making microchips is no simple process and the technology to do so is tightly controlled by the great political powers of the world. Right now, the biggest chipmaker in the world is facing massive tariffs in the US.

Sweet mercy, what now?

President Donald Trump promised tariffs of up to 100% on Taiwan’s export of microchips to the US. These remarks were made yesterday at the House Republican Issues Conference in Miami. “In the very near future we’re going to be placing tariffs on foreign production of computer chips, semiconductors, and pharmaceuticals to return production of these essential goods to the United States of America,” the president said. “They left us and they went to Taiwan.”

These proposed tariffs appear to directly target Taiwan Semiconductor Manufacturing Company, which was founded in 1987 in Taiwan. TSMC isn’t the only semiconductor maker in the world, but it does control over 60% of the market and produces the most advanced chips in the world. TSMC is responsible for the fabrication of chips for AMD, Apple, ARM, Broadcom, Google, MediaTek, Qualcomm, and Nvidia. If this tariff goes into effect, it will have a major impact on the prices of many consumer electronic devices.

How will this effect you?

You will have to pay more money

What does this mean for phone nerds? Higher prices. Two days ago, Marques Brownlee posted about the materials cost of a smartphone, showing that the processor is the single most expensive component, comprising around 40% of the total value of the phone. In this scenario, a 100% tariff on semiconductors would raise the price of a phone from $500 to $700, a 40% increase. Of course, this type of price increase would apply to every chip that comes out of Taiwan.

Ostensibly, this move is designed to force chipmakers to move their production of silicon to the United States. The US does have a number of home-grown foundries, Intel being the largest of the bunch, but Intel is a step behind TSMC technologically and in its capacity for production. There is a TSMC facility in Arizona that has better yields than the foundries back in Taiwan, but the Arizona facility only supplies 240,000 wafers per year whereas the Taiwan facilities supply over 16 million. TSMC has two more facilities under construction in Arizona, but even if their output equaled the current plant’s, the annual output would still be less than one million.

Can the US catch up?

Absolutely, but it will be a huge investment

Just going by these numbers, the US would have to build over 60 new fabs to match the output of just one company from Taiwan. According to Intel, building a fab takes at least three years, $10 billion, and 7,000 workers. If we started work on 60 facilities today, we would need $600 billion and 420,000 workers. And we haven’t even considered the supply chain issues. Sixty fabs would require 36 million cubic meters of concrete, 6.6 million tons of steel, and 54 million meters of cable.

On the other side of the Pacific, Taiwan has highlighted the complementary nature of the relationship between the US and Taiwan wherein the US designs chips and Taiwan produces them (via Reuters). As of now, the tariff is idle talk, but given the volatility of the current administration, it could come into effect at any moment.