View attachment 2738
Robert Maire of Semiconductor Advisors:
- Our view of chopping the CHIPS Act may be proven correct soon
- Trump announced chip tariffs coming soon- Unclear if it hurts or helps
- Neither Trump's stick nor Biden's carrot can re-shore chips faster
- Chip tariff ramifications have not been fully thought through
Will Trump "stop payment" on CHIPS Act checks??
In several past notes we suggested that the CHIPS Act could be simply undone by the new administration just not cashing the promised checks or dishonoring all the last minute deals signed by the Biden administration at the 11th hour.
We were criticized by many readers for suggesting something so outlandish........
Until we saw the first week of the new administration.......
The new administration in its first week has thrown normal precedent to the wind and clearly thinks anything can be canceled or undone by executive action or whim......
We think the probability of the CHIPS Act being undone, tossed out or just plain ignored has just gone up to a very high probability.
Trump has clearly alluded to that in recent statements about chips.
Chip tariffs coming soon.....
In that same Trump statement on chips he said that chip tariffs would be coming soon.
He said 25%, 50% even 100% taxes on imported chips.
Said 98% of chip production went to Taiwan
Called the CHIPS Act ridiculous
Said some chip companies didn't want CHIPS Act money
Trump obviously has a bone to pick with Taiwan and TSMC
Its unclear who would get hurt by chip tariffs the most - likely consumers
If a 25% tariff were put on imported chips it would have to include any products that contained those imported chips, which is virtually everything made today.
Cars, laptops, TVs , toaster ovens, washers, dryers, cell phones, appliances, IOT, medical devices, communications equipment, aerospace, navigation and perhaps most importantly every AI chip made today, because not many are made in the US.
Talk about an inflationary stimulus .......at the end of the the day consumers would suffer as there is no way at all that all those chips could be made in the US in the next five to ten years. It took the US over 30 years to lose the chip industry and it can't come back in the snap of someone's fingers.
The only real way to make it work would be to slowly ramp up tariffs over many years to give some time to move high value production back otherwise end user (consumers) are screwed and inflation will soar.....
Does the administration realize even US made wafers become imported?
Maybe someone should tell the administration that many wafers that are produced in the US get sent overseas to be packaged thereby making them imported when they return.......
Could TSMC send finished wafers to the US to be packaged thus becoming domestically produced without ever having a fab in the US?
Carrot or stick doesn't matter...re-shoring will take a long time
Whether you incentivize re-shoring by using the Biden "carrot" of the CHIPS Act or the "stick" of Trumps tariffs it will take a long time.
From bare earth to chips rolling out the back door is at least a five year process which doesn't happen any faster wether you tax the hell out of it or throw 100's of billions at it.
They are just two polar opposite ways of accomplishing the same goal, both involving high costs and taking a similar amount of time.....
Could chip tariffs kill AI development in the US?
Since all AI chips are imported, what will happen to the cost of building an AI data center in the US?
Why would I build an AI data center in the US? Maybe I should build an AI data center in Canada (the 51st state) where there are no AI chip tariffs and then just access the data center across the border via the internet.
It would put any AI company wanting to build in the US at an extreme disadvantage versus building elsewhere.
Would it make a potential DeepSeek cost advantage even bigger?????
Talk about shooting yourself in the foot......
Chip tariff ramifications not fully thought out
History shows us that tariffs are not the simple panacea that some will try to claim as there are many, many ramifications and collateral damage that needs to be contemplated and exceptions made.
The pervasiveness of semiconductors means that tariffs would have very far reaching impact as many unthought of consequences. It is not a singular industry or finite products, semiconductors are in everything and everywhere.
Would tariffs be applied to chips used in defense electronics and the military? or used by the government itself?
You could put 1000% tariffs on chips and the industry couldn't reshore quickly enough.
The stocks
The semiconductor industry will likely get whipsawed over the coming weeks and months as the threat of tariffs will hang over the industry like the sword of Damocles.
Companies, like ON semiconductor for one, are still moving production overseas as quickly as possible.
Will semiconductor equipment made in Malaysia , Singapore , Japan and the Netherlands have tariffs slapped on them due to all the chips they contain? Thereby countering the move to reshore?
Will US companies like TI or Intel that package overseas get tariffed because of that packaging step?
The semiconductor industry will likely see chaos similar to what we are starting to experience in other things touched by the new administration.......
Stocks typically don't like uncertainty or risk and we are certainly entering a period of great uncertainty and if the past week is any sample its going to get weirder.....
Buckle up buttercup........
About Semiconductor Advisors LLC
Semiconductor Advisors is an RIA (a Registered Investment Advisor), specializing in technology companies with particular emphasis on semiconductor and semiconductor equipment companies. We have been covering the space longer and been involved with more transactions than any other financial professional in the space. We provide research, consulting and advisory services on strategic and financial matters to both industry participants as well as investors. We offer expert, intelligent, balanced research and advice. Our opinions are very direct and honest and offer an unbiased view as compared to other sources.