Chipmaker Vanguard warns US tariffs could fuel inflation

Taipei — Taiwanese chip maker Vanguard International Semiconductor warned on Tuesday that US tariffs on imported chips could spur inflation and affect global economic growth, but said it expects the direct impact on the company would be small.

US President Donald Trump said last week that he intends to impose auto tariffs in the neighbourhood of 25% and similar duties on semiconductors and pharmaceutical imports, the latest in a series of threats that could upend international trade.

Vanguard chair Leuh Fang told analysts on a post-earnings call that the company was adopting a “wait and see” stance as it was unclear how serious and far the Trump administration would go.

“If tariffs are implemented ... it will cause many impacts, from inflation to a decline in end-product purchasing power and even affect expected economic growth,” he said.

“This will have some impact on the global semiconductor industry, but we lack the ability to predict how the potential impact will develop.”

But the direct threat on Vanguard itself was expected to be “trivial”, he said. Vanguard makes legacy, or mature node chips, that are used in cars and display panels.

“The proportion of our company’s semiconductor products directly exported to the US and facing tariffs is very low.”

The company is not considering setting up a factory in the US, he said. Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker that focuses on advanced chips, is building factories in Arizona while some Taiwanese laptop and AI server makers are considering expanding into the US to counter Trump's tariffs.

TSMC owns 27.15% of Vanguard’s shares.

Vanguard is among Taiwanese chipmakers that are seeing Chinese rivals eating into their market share by slashing prices and embarking on aggressive capacity expansion plans.

Fang, however, said that such moves by Chinese foundries, combined with growing tensions between US and China, were prompting some American customers to strategically shift away from China since last year and he expected the pace of order transfers to Taiwan to continue to intensify.

“Chinese companies are building up unneeded capacity in mature processes, leading to vicious price competition and a lack of trust among many customers. The trend of order transfers is more evident among American customers and it involves multiple customers, not just one,” said Fang.

Vanguard posted a 19.4% year-on-year jump in revenue to 11.55-billion New Taiwan dollar ($352m) and a 48.7% jump in gross profit to 3.314-billion New Taiwan dollar for the quarter ended December 31.

Reuters