TSMC's Japanese Expansion Sparks Local Boom Amid Tariff Woes and Stock Concerns

Recent developments surrounding Taiwan Semiconductor Manufacturing Company (TSMC) highlight significant industrial shifts. Notably, TSMC’s investment in Japan is creating notable magnetic effects. The company's first plant in Kumamoto began mass production in December, and a second facility will start construction soon. Together, these plants represent an investment exceeding three trillion yen. Neighboring the TSMC site, Sony Group is also constructing a new plant for image sensor production, while TEL, Japan's leader in semiconductor equipment, is setting up a new R&D building nearby, transforming the area into a globally recognized industrial hub.

Beyond attracting technology firms to establish factories, the presence of TSMC's facilities has spurred the construction of hotels and residential buildings, contributing to rising local property prices, which are now among the highest in Japan, and enhancing population growth in the region.

In the backdrop of these local developments, international trade tensions cast a potential shadow. Despite former President Trump's tariffs not directly targeting Taiwan, the looming threat of a 100% tariff has caused concern among Taiwanese industries. The announcement of potential tariffs could dampen TSMC's stock, and if enacted, might press TSMC to expand its capacities in its U.S.-based facilities.

Given that American customers comprise approximately 60%-70% of TSMC's revenues, additional U.S. tariffs would elevate the costs for chip customers. A 100% tariff could lead to a scenario where import costs of Taiwanese semiconductors surpass the cost of chips produced in TSMC’s U.S. facilities, traditionally priced 10%-20% higher than Taiwanese counterparts. This scenario may compel companies like Apple, NVIDIA, AMD, and Qualcomm to push TSMC towards boosting its U.S. production capacity, potentially affecting TSMC's profit margins.