Tariffs for now won’t impact IT organizations

The impact of tariffs by the Trump Administration on semiconductors from Taiwan is so far not cause for alarm, according to one analyst.

President Donald Trump has threatened to hit semiconductor imports with a 25% tariff in an effort to incentivize chipmakers to manufacture chips in the United States instead of importing them. This ignores the reality that there aren’t enough fabrication plants in the US to make all these chips begin with, and building them will not be accomplished overnight.

Potential impacts to businesses are likely to be minimal, according to Scott Almassy, US semiconductor lead for PwC. “In their purest sense, for a majority of the higher end [companies] in the semiconductor industry, it’s not as big a deal. It’s more just a nuisance that needs to be assessed, managed and obviously monitored,” Almassy said. “But I don’t think it’s upsetting the fundamental medium- or long-range plans of most companies.”

Almassy’s argument is that the cost will not be fully passed on to the customer and instead will be absorbed by the OEM that buys the chips. Chipmakers like TSMC and GlobalFoundries don’t sell directly to end users but rather to OEMs like HPE and Supermicro, and they can absorb some of the cost.

“I think it will vary by industry,” Almassy said. “Obviously the middle ground would be splitting it 50% with the supplier, 50% to the consumer. I think it’s going to be a calculus that’s going to have to be done by each individual company with where they feel like they are in the value chain, and what kind of pricing power they have.”

Almassy says tariffs will definitely be felt by consumers more than IT organizations because there are “fewer levers consumers can pull” and fewer actions that consumers can take than enterprises, which are constantly on edge about what they need to do to maintain and grow their business, and what’s around the corner.

The idea behind tariffs is to increase domestic manufacturing, but Almassy notes the United Stated doesn’t have the manufacturing capacity or capability that Taiwan does. TSMC, Samsung, and GlobalFoundries have some fabs here, but they are not building the most leading edge technologies.

“Those are all in Taiwan at the moment. Those fabs take years to ramp up right. And then you need the workforce to be able to turn them into profitable factories. That doesn’t happen overnight either,” he said.

Almassy said it’s not possible to predict when the tariffs will hit because they haven’t been implemented yet. “The magnitude of it remains to be seen, based on the duration and the overall macro connection and how things play out more broadly,” he said.

Still, others say tariffs would harm the industry.

“The tech industry is a global industry, and as we saw during Trump’s first term, if you place restrictions on any part of the value chain, you impact the entire value chain in one way or another. Between Trump’s threats and [China president Xi Jinping’s] threats [referring to the restriction of rare earth materials], the tech industry could be in for a very rough ride, not to mention the US and global economies,” said Jim McGregor, principal analyst with Tirias Research, in a recent Network World article