The semiconductor sector, a key component of the global economy, is facing a paradigm shift ahead of Donald Trump’s imminent assumption of the presidency of the United States on January 20, 2025. With memories of the trade restrictions and tariffs imposed during his first term, major companies in the sector have begun relocating their production out of China to minimize the impact of potential sanctions and tariffs.
Taiwan as a New Epicenter for Chip Production
Among the companies leading this transition is UMC (United Microelectronics Corporation), the world’s fourth-largest chip manufacturer. In light of political uncertainty, UMC has decided to prioritize production in Taiwan, shifting machinery and resources to its factories on the island. This strategy aims to avoid potential tariffs that could be imposed on products made in China.
UMC has increased its capacity in key nodes such as 28 nm and 22 nm, which are essential for applications like automotive, telecommunications, and electronic devices. Despite a 6% month-on-month decline in revenue during November 2024, the company reported a year-over-year growth of 6.71%, demonstrating that the relocation strategy could be crucial for its sustainability.
Threats of New Tariffs and Their Global Implications
The Biden administration, in its final days, has initiated a trade investigation into chips made in China using mature processes, arguing their relevance to key sectors like automotive and telecommunications. This move, along with the potential protectionist policies of Trump, has raised alarms in the sector.
The imposition of tariffs on semiconductors produced in China could significantly increase costs for industries such as automotive, which is already facing tensions due to the global chip shortage in recent years. This has prompted companies like Tower Semiconductor, PSMC, and GlobalFoundries to reconsider their contracts with Chinese suppliers to avoid sanctions.
The Taiwanese Strategy Amid Inaction from Other Players
While UMC and other Taiwanese companies have reacted quickly to the political landscape, giants like Samsung, with significant factories in China, have shown a slower response. This could place Taiwanese companies in a competitive advantage, especially if they manage to secure more resilient and diversified supply chains.
Furthermore, Taiwan is consolidating its position as a central hub in semiconductor production, thanks to the agility of its companies and government support. The ability of these companies to rapidly adapt to market conditions will be crucial in the coming years, especially considering that UMC anticipates a significant recovery in the wafer industry by 2025.
A Cost and Wages Challenge
The move out of China presents additional challenges for semiconductor companies, particularly in terms of labor costs and pricing strategies. Maintaining competitive prices for customers while facing higher costs outside of China will be a delicate task.
UMC, for instance, has indicated that it will focus on high-end smartphone displays, RF modules, and optimizing its portfolio to maintain competitiveness. This strategy, combined with pricing flexibility, could help mitigate the financial impacts of relocating production.
Outlook for 2025 and the Future of Semiconductors
The semiconductor industry is not only dealing with trade tensions but also with a complex market environment. UMC and other companies anticipate that the full recovery of the sector could extend into the second quarter of 2025, particularly in segments like automotive that have been hit hard by the chip shortage.
However, the strategic move to relocate production away from China is not just a response to Trump’s threats, but also a bet on long-term resilience. With Taiwan as a key hub and the implementation of new strategies, companies hope to adapt to an increasingly unpredictable political and commercial environment.
Conclusion
Donald Trump’s return to the presidency of the United States is redefining the landscape of the semiconductor sector. Companies like UMC, TSMC, and others are taking preventive measures to minimize the impact of tariffs and restrictions by shifting part of their production to Taiwan. This move highlights the importance of the island in the global industry and underscores the need for adaptive strategies in the face of a highly volatile trade environment.
As 2025 unfolds, the chip sector will continue to face challenges, but also opportunities to strengthen supply chains, diversify markets, and adapt to new rules of the game.