WSJ What’s News - The Uncertain Road Ahead for Chip Makers

Episode Date: April 17, 2025

A.M. Edition for April 17. Chip giant TSMC beat quarterly earnings estimates today, posting a 60% jump in profits. But can the stars of the semiconductor industry sustain their momentum as Washington limits what can be exported to China and mulls new chip tariffs? UBS head of Taiwan research Randy Abrams weighs in. Plus, Japan and Italy try to find common ground with the White House on trade. And WSJ markets reporter Chelsey Dulaney explains why the dollar’s recent slide is becoming the rest of the world’s problem. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chip giant TSMC beats earnings. We'll dive into its results as the sector contends with export restrictions and looming tariffs. Plus, Japan and Italy try to find common ground with the White House on trade and why the dollar's recent slide is becoming the rest of the world's problem. It's going to be harder to sell to America. So that's a big problem for foreign economies when they're already facing Trump's tariffs and the weakness of the dollar is really the last thing they need right now. It's Thursday, April 17th.

I'm Luke Vargas for the Wall Street Journal and here is the AM edition of What's News, the top headlines and business stories moving your world today. Global markets are finding their footing a day after a tech stock-fueled route on the Nasdaq that was triggered by deepening trade restrictions targeting chip industry leaders NVIDIA and AMD. Should the Chinese market remain off limits, it could spell challenging times ahead for

the biggest names in semiconductors. Though for one of the hottest sectors in recent years, there continues to be ample news to get excited about, including from Taiwan Semiconductor Manufacturing Co., the world's largest contract chip maker, whose clients include Apple and Nvidia, reported earnings this morning, beating analyst estimates on a 60% jump in profits. Randy Abrams is head of Taiwan research at UBS, and he joins us this morning from Taipei. Randy, what jumped out to you from TSMC's latest update? We've just gotten off the earnings call on a week of rather rocky updates from leading

names in the chips industry. They are the largest outsource semiconductor manufacturer really for a lot of the major chip companies, Nvidia, Qualcomm, Broadcom, Apple. And for that, they set the stage for how the outlook is. We've seen in recent weeks, Trump has postponed some of the reciprocal tariffs. And he's also on some of these tech products in the last week, also put them on hold. Now he's indicated that could come back,

that the reciprocal tariffs in 90 days may come back. And also some of these tech semiconductor and hardware tariffs could come back on. So the message for the supply chain is to continue to order components, to continue to build products, and essentially make their deliveries with that uncertainty, whether the tariff they're gonna be paying in the future

in a couple months may be higher. So to that extent, I think TSMC's main message is, hey, our orders have not really changed. We still see good strength. They guided a strong second quarter. They did put an important caveat that they need to come back to us in three months as we get closer to second half to see what is just what tariffs come back on. And by that point, do we have any sign of some moderation?

What is the sense about the options that might exist for de-risking? TSMC has been out there talking about its investments in the US. Do they feel confident what they've done so far is enough to, I don't know, score them an exemption maybe from US tariff action or might they need to do more and maybe should they for other reasons in the future? TSMC really was on the front foot or the gas on to engage Trump to say, look, how can we do more? Part of it because I think their customers are feeling a bit more of the pressure to have more of a US based supply chain. So that is encouraging TSMC to go a bit faster

in Arizona. So they're doing what they can. And I'll say their hope I think for doing that is, can this help mitigate some of the tariffs? Now that comes back to the government side. The government with key players in Taiwan, where TSMC is included, are trying to go to US with negotiation leverage. And it's, what can we bring to US? In the Nvidia press release,

it really telegraphed that SPIL, which is now tied to ASC, the biggest packager in Taiwan, is part of that US investment. That was kind of a new announcement, new investment that we hadn't heard about before. And then on the hardware and assembly, you're starting to see in the releases more of the comments about Hon Hai, like Foxconn Hon Hai, which seven, eight years ago talked about Wisconsin and doing production. Well, now those facilities start to come back in to do server assembly.

Others like Kwanen-Wistron also talk about server assembly in the US. So that's what I'd kind of say what Taiwan will try to do more of to mitigate their level of reciprocal tariff or semiconductor tariff is offer what type of business arrangements we can do to help the US reshore some of the supply chain. Randy, the big story thus far this week has been these export restrictions affecting Nvidia and AMD, though President Trump has signaled more US tariffs specifically on semiconductors could be coming potentially as soon as this week.

That then is the next storyline we should be watching for. What are you expecting? What potential impact should investors be bracing for here? If it's semiconductors alone, that's actually somewhat manageable and reason for that. Taiwan last year exported about 37 billion, which sounds like a big number, 37 billion of chips. But if you were to actually take into account

all the production coming out of TSMC, from Micron, from UMC, it's about $250 billion worth of chips. So it's only about 15% of chips ship as a raw semiconductor. The bigger risk would be all of these tech products, whether it's a chip or it's the hardware, whether it's a notebook or a server or a smartphone,

as a bundle, we're going to put a tech tariff on. So do we get a, like the reciprocal tariff, a tech tariff where US says, hey, you have to reshore. I don't care if it's a chip or the hardware. I'm going to put a, say, call it 25% tariff on, no matter where it ships from on a tech product. That would be the type of scenario that ends up a bigger outcome for the supply chain. So I'd say chips alone, somewhat manageable.

If it's chips plus hardware, I think then you're going to see the supply chain try to negotiate areas of relief to at least mitigate how much impact it could have on demand. Soterios Johnson Yet more importance hanging on every word coming out of Washington. Randy Abrams is the head of Taiwan research at UBS and was joining us this morning from Taipei. Randy, thanks so much for being with us on What's News. Okay, thank you, Luke.

Coming up, we'll look at the effect a weak dollar is having on the global economy and preview today's White House visit by Europe's Trump whisperer, Italian Prime Minister Georgia Maloney. Plus the rest of the day's news after the break. If only life had a remote control, you could pause or rewind. Well, life doesn't always give you time to change the outcome, but pre-diabetes does. Take the one minute risk test today at Do I Have Pre-Diabetes dot org, brought to you by the Ad Council and its pre-diabetes awareness partners.

The U.S. dollar has paused its steep slide this week after hitting new lows against the euro, Japanese yen, and Swiss franc yesterday. While weaker currencies tend to make goods cheaper for American consumers, the journal's Chelsea Delaney says the dollar's unexpected weakening is adding to the pain for foreign sellers who've already been hit by tariffs. So a weaker U.S. dollar means that other currencies are getting stronger. So we've seen this big rise in currencies like the euro or the Japanese yen or the British pound. And for companies overseas, this is essentially a double whammy. They are already facing a 10 percent tariff or more on their goods that they're selling to the U.S.

If you add on top of that the currency, that means that their goods have gotten even more expensive when selling into the U.S. While President Trump has said he wants a weaker dollar to make American exports more attractive, Chelsea says his back-and-forth trade policies have resulted in investors dumping U.S. assets. What we're seeing is really investors questioning the attractiveness of U.S. assets at all. There's a lot of discussion and concern that investors are no longer seeing the dollar or U.S. treasuries as a safe haven. Foreign investors are pulling money out of the country. And that can really overshadow

any positive impact you might get from competitiveness if foreign investors are questioning the long-term growth prospects of the U.S. economy. For central banks around the world, the rapid strengthening of their own currencies is heaping pressure on them to cut interest rates more aggressively. The European Central Bank is expected to deliver a quarter-point reduction today, while the Bank of Korea decided to keep its rate unchanged. Meanwhile, one of the Bank of Japan's board members says U.S. trade policy is one of the biggest risks to Japan's economic outlook, warning that higher tariffs will negatively

affect exports, production, sales, capital expenditure, and profits at Japanese corporations. Trade negotiations between the two countries are underway in Washington this week, with Japan's economy minister saying he's ready to listen to any requests, urging a win-win solution. In a Truth Social post, Trump said big progress was made in the talks. While speaking of talks, in Washington, Italian Prime Minister Giorgia Maloney is set to become Big progress was made in the talks. While speaking of talks, in Washington, Italian Prime Minister Giorgia Maloney is set to become the first European leader to meet with President Trump in D.C. since his tariff announcement earlier this month.

Trump has repeatedly taken aim at the EU, accusing it of screwing the U.S. on trade and hitting it with a 20% reciprocal tariff. Our Rome-based correspondent Margarita Stancati said the Italian leader's visit today will test whether Maloney's ideological affinity with Trump will be enough to convince the president to go easy on Italy and the EU as a whole. She gets along with Trump because they share the same kind of conservative, anti-woke worldview, and they've met each other and Trump likes her. So that already in itself sets her apart from some of her other European colleagues.

Trump went as far as describing her a fantastic woman. She's also friends with Elon Musk, who has helped broker this relationship. As for what Maloney can offer in talks, Margarita said she's expected to lead with a pledge that answers Trump's call for Europe to do more to take care of its own security. Among the things that Maloney is expected to offer when she does meet Trump is a promise that Italy is going to increase its defense spending to 2% of its budget. That's something that Trump has repeatedly asked for and that she is going to deliver. The question is whether she will be able to translate this good relationship into a breakthrough on tariffs and more broadly on the relationship between the US and Europe, which has been

very rocky in recent months. Meloni is likely going to make the case for the European Union's so-called zero for zero tariff deal, offering to bring down tariffs on imported American goods to zero in exchange for the same for European goods in America. But Trump has made it very clear that that will not be enough for him. The Trump administration has asked the IRS to start the process of revoking Harvard's tax-exempt status, which lets donors get tax deductions and keeps the university from paying taxes on any net earnings.

The effort comes after Harvard rejected a list of demands from the administration, including a request for the school to share all admissions data with the federal government. Trump and Republicans in Congress have been battling with Harvard, accusing it of not doing enough to combat anti-Semitism while also pressuring it to end DEI programs. And Secretary of State Marco Rubio and White House envoy Steve Witkoff are in Paris today, meeting with European officials to discuss ending the war in Ukraine. Earlier this week, we reported that Rubio was among several senior aides now urging Trump to be more skeptical of Moscow's desire for peace and to take a harder line against Vladimir Putin's demands for territorial concessions from Kiev. And that's it for What's News for this Thursday morning.

Today's show was produced by Daniel Bach and Kate Bulevent. Our supervising producer is Sandra Kilhoff, and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.