Trump’s China Tariffs Could Reshape These 2 Semiconductor Stocks

Key Points

• The Trump administration has made no secrets about its America First policy, especially in relation to Chinese products and national security.
• Taiwan is a hotbed for the semiconductor industry as 90% of the most advanced chips are made in the country, which China believes is part of their territory.
• The Biden Administration enacted tighter restrictions on sales of semiconductor equipment to China that will impact ASML. Still, the company expects long-term impacts to be minimal as it trims its exposure.

The returning Trump administration will embody its “America First” and “Made in America” stance more than ever in 2025. President Trump has stated that he will tariff imports up to 25%, especially with Chinese goods tacking on upwards of a 60% tariff. Trump is also adamant about American independence in the semiconductor industry within the computer and technology sector. Trump has stated his belief that Taiwan has stolen away America’s chip industry.

President Trump has been a critic of the U.S. CHIPS Act and the Inflation Reduction Act. Vivek Ramaswamy, a Department of Government Efficiency (DOGE) co-leader, has also criticized policies and plans to scrutinize wasteful subsidies. Here are two critical semiconductor companies in the computer and technology sector at risk for more trade restrictions and impacts from the Trump Administration.

Taiwan Semi: Making the AI Revolution Possible in the United States

Taiwan Semiconductor Manufacturing Co. Ltd. NYSE: TSM not only manufactures the majority of chips for the top semiconductor companies in the United States, like Apple Inc. NASDAQ: AAPL and QUALCOMM Inc. NASDAQ: QCOM, but it also has a literal monopoly on artificial intelligence (AI) chips including GPUs, application specific integrated circuits (ASICs). The AI boom is only possible because Taiwan Semi is producing AI chips for NVIDIA Co. NASDAQ: NVDA, Applied Micro Devices Inc. NASDAQ: AMD, Broadcom Inc. NASDAQ: AVGO, and Marvell Technology Inc. NASDAQ: MRVL. This makes Taiwan a major trade partner of the United States.

If Trump imposes his 10% tariffs on chips made in Taiwan, it will cost more for the AI boom to continue. However, Taiwan’s central bank head doubts it will happen. Taiwan Semi collects the majority of its revenue from the United States, around 65%, and around 10% to 12% of its revenue from China. The top hyperscalers like Google, Amazon, and Microsoft Co. NASDAQ: MSFT are in the process of making their own AI chips depending on Taiwan Semi, usually through Broadcom or Marvell Technology. Even Tesla Inc. NASDAQ: TSLA relies on Taiwan for its chips.

The Threat of Chinese Invasion of Taiwan by 2027

With Taiwan Semi producing 90% of the world’s most advanced computer chips, Chinese control over Taiwan is a major global threat. China's President Xi Jinping has publicly stated that he wants to bring Taiwan back under Chinese control. Beijing believes Taiwan is part of its territory, while Taiwan states it is not. China has ramped up military activities around Taiwan. On Feb. 2, 2024, United States Central Intelligence Agency (CIA) director William Burns stated that Xi had already ordered his military to prepare for an invasion of Taiwan by 2027. However, analysts doubt this will come to fruition, especially during Trump’s second term.

Rescinding the $7 Billion to Taiwan Semi From the CHIPS Act

Taiwan Semi is building a foundry in Arizona and is supposed to receive $7 billion under the CHIPS Act. Trump has stated his opposition to giving money to foreign companies to build plants in the United States. He doesn’t believe they would be building the advanced chips here anyway. Taiwan Semi hasn’t received the funds yet, and the threat of having them rescinded or paused if Trump’s inauguration does not disperse them is high. Trump will naturally favor domestic semiconductor companies building out foundries in the United States like Intel Co. NASDAQ: INTC, Texas Instruments Inc. NASDAQ: TXN, and GlobalFoundries Inc. NASDAQ: GFS.

ASML: More Potential Fallout From China Trade Restrictions

To produce computer chips, you need the photolithography machines to make them. ASML Holding N.V. NASDAQ: ASML produces the extreme ultraviolet light (EUV) photolithography machines necessary to make CPUs, GPUs, and ASICs. While the Netherlands-based company sells deep ultraviolet (DUV) machines to China, they have never sold their most advanced EUV machines due to restrictions set by the Dutch government. The Dutch government is aligned with the United States in its belief that China is a threat. Its foreign ministry states, "The Netherlands shares American concerns over uncontrolled export of advanced semiconductor equipment."

The United States imposed a third crackdown in three years, tightening semiconductor equipment regulations and exporting to 140 Chinese companies. ASML has stated that it will be impacted by the restrictions of its DUV lithography machine sales to China but expects the long-term impacts to be minimal. ASML expects to generate 20% of its sales from China, but that amount has been falling from 50% in 2024.