The semi industry is caught in the midst of the trade war, putting companies like Taiwan Semiconductor on notice. Initial news, however, is positive, with Taiwan looking to work with the U.S. on tariff negotiations.
President Trump’s administration is scrutinizing the import of chips as a potential security threat, citing the heavy reliance on semiconductors produced in foreign nations. Tech giants like Apple and Nvdia rely on Taiwan Semiconductor for their chips.
As the linked Reuters article mentioned, the U.S. leans quite heavily on Taiwan as a supplier of chips, with the previous presidential administration looking to wean itself off the country with the Chips Act. Said act was aimed to offer funding for U.S.-based semiconductor companies to innovate and enhance their products.
In the meantime, Taiwan will simulate the economic impacts of tariffs on the semiconductor industry.
“As to how much (the tariffs) could be, we will of course carry out simulations,” said Taiwan Economy Minister Kuo Jyh-huei. “On the tariffs issue, we will try as hard as possible to communicate with the U.S. side.”
As for Taiwan Semiconductor’s profitability prospects, it doesn’t appear fazed. The company recently saw profits jump 60% while revenues climbed more than 40%. That prompted the CFO to note tariffs have yet to impact earnings.
“While we have not seen any changes in our customers’ behavior so far, uncertainties and risks from the potential impact from tariff policies exist. We will continue to closely monitor the potential impact on the end market demand, and manage our business prudently,” said CFO Wendell Huang.
Trade the Semiconductor News
Taiwan Semiconductor’s stock has been falling with the rest of the market so far this year. But its most recent earnings result could certainly help its fortunes in the interim. Meanwhile, traders who suspect more downside on the horizon can look at single-stock ETFs like the Direxion Daily TSM Bear 1X Shares (TSMZ). As mentioned, positive news from the financial markets like a favorable earnings report can boost the other side, with the Direxion Daily TSM Bull 2X Shares (TSMX).
Traders looking for upside for the semiconductor industry as a whole may want to consider using the Direxion Daily Semiconductor Bull and Bear 3X Shares (SOXL). The fund tracks the largest movers and shakers within the industry, including Taiwan Semiconductors. It offers traders diversification as opposed to accepting the concentration risk associated with holding one position in a single stock.
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