TSMC’s new shape and two weeks of tariff trauma

Hi from Taipei, everyone! This is Cheng Ting-Fang, your TechAsia host for this week.

It’s been a roller-coaster two weeks for many supply chain executives and managers, with the world’s two largest economies slapping tariffs of 125 per cent or more on each other and the US threatening “reciprocal” tariffs on most of its trading partners and further tightening AI chip export controls.

Key suppliers across Asia providing everything from components to final assembly for Apple, Samsung, HP, Dell, Amazon and Meta have been on call nearly 24/7 to deal with the fallout — and with some close contacts at these suppliers, I feel like I am sitting in the back seat watching this real-life drama unfold.

“I might need to see a psychiatrist for my mental health,” a manager at a component supplier told me. “Before I went to sleep, customers said they needed to hold all US shipments the next day, but when I opened my eyes, an urgent notice had come saying they now wanted manufacturing to come back at full speed and to move all orders in the third quarter to now to take advantage of the 90-day reciprocal tariff pause.”

This is just one example of the kinds of messages I have been receiving lately. The relentless pace of these policy changes is punishing, and the uncertainty and pressure even more so.

Fang Leuh, chair of TSMC’s affiliate chipmaker Vanguard International Semiconductor, was very open about the challenges. He said that before Trump’s tariffs, his company was eyeing “mild growth” for 2025, but now they need to “revisit” that outlook. When asked about potential growth drivers for this year, the chair said there was “nothing to write home about”.

Yesterday evening, I had a phone call with another long-time industry friend whose company serves major PC makers. He told me that some new problems had emerged: even some products made in China for non-US markets still need materials from American suppliers, like 3M and DuPont. Such components became 125 per cent more expensive overnight due to China’s retaliatory tariffs. To make matters more disturbing, some tech brands have hinted that they could ask suppliers to cut prices in the second half of 2025, as shifting supply chains eat into their profits.

For more than two decades, consumers worldwide have been able to take for granted that top-tier tech products like iPhones and MacBooks will arrive on time and at reasonable prices thanks to a massive, efficient electronics supply chain working around the clock. This golden era may already be coming to an end.

I remember loving a children’s book called Monty when I was little. In the story, an alligator named Monty ferries a rabbit, a frog and a duck across the river to school every day. The trio relies on Monty but constantly criticises his swimming and speed. Then one morning, Monty is gone — the alligator is on vacation. The three friends try every way imaginable to cross the river on their own but fail, finally realising just how vital Monty is.

By undermining the ultra-efficient global supply chain, the US now faces its own “Monty moment”. The ripple effects of this decision will be felt by the entire world.

TSMC’s new tech takes shape

In an ever-changing geopolitical landscape, tech companies must continue to innovate to survive. Nikkei Asia’s Cheng Ting-Fang reports that TSMC is finalising the first design for its next-generation chip packaging technology, which involves a radical change in substrate shape to help leading AI chip developers such as Nvidia, Amazon and Google boost computing performance.

The chipmaker is targeting small-volume production of the so-called panel-level packaging in 2027, with the first pilot development line in the Taiwanese city of Taoyuan. Sources told Nikkei Asia that the first generation of this packaging method will use a 310-mm-by-310-mm square substrate, the material on which chips are built.

If successful, TSMC’s move to a radically different chip packaging approach will significantly impact the product and R&D road maps of many equipment manufacturers. US, Japanese and Taiwanese chip tool makers have already started redesigning their machines to accommodate the new form factor. This square-shaped substrate can integrate more AI superchips than traditional round wafers, enabling even more powerful AI computing.

Optical advance

Apple supplier TDK is claiming a major breakthrough in technology to speed up data processing and solve a key bottleneck for the expansion of generative artificial intelligence, writes the Financial Times’ Harry Dempsey in Tokyo.

Once famous for cassette tapes with its logo visible on advertisements in London’s Piccadilly Circus, the Japanese group believes its world-first spin photo detector — a melding of optical, electronic and magnetic elements — will be a gamechanger for boosting data transmission and reducing the power consumption of data centres.

A demonstration conducted with Nihon University showed a response time of 20 picoseconds, or 20 trillionths of a second, which is 10 times faster than traditional semiconductor-based photo detectors.

Although the path to commercialisation is set to take up to five years and require co-operation from integrated circuit designers, TDK’s new tech highlights how the transfer of data between processing units has become one of the key issues in developing generative AI.

Other industry leaders, including the world’s largest chipmaker TSMC, are also throwing resources at solving the problem through next-generation silicon photonics that make use of optical technologies to overcome the current constraints of electronics.

Live in the moment

Shares of major Chinese and Taiwanese tech suppliers took a beating in the days and weeks after Trump unleashed his “reciprocal” tariffs, offering a gauge of the supply chain disruption this policy is expected to bring.

Some executives even say the uncertainty now exceeds even that seen during the Covid-19 pandemic, Nikkei Asia’s Lauly Li and Cheng Ting-Fang write. A manager at one supplier said they are living as if there is no tomorrow due to the extremely low visibility of future demand.

With the 90-day pause on most “reciprocal” tariffs and a temporary exemption for smartphones and laptops, brands such as HP, Dell and Meta are urging suppliers to boost production for the US market. Apple, meanwhile, has been asking suppliers to build more products since earlier this year due to tariff uncertainties and is auditing suppliers’ non-China production facilities. The company has also asked suppliers to prepare to assemble over 90 per cent of its new iPhones, set to launch later this year, in India for the US market.

However, game consoles were not lucky enough to be covered by the US tariff exemptions, meaning units shipped from China could face charges as high as 145 per cent. This poses a significant challenge for Nintendo’s highly anticipated Switch 2, as the majority of its production currently takes place in China, as Li and Cheng report.

Come together

Two heads are better than one. This line of thinking has inspired Japanese automakers including Toyota, Nissan and Honda to come together to develop a standardised design for next-generation automotive chips by March 2029, Ryohtaroh Satoh of Nikkei Asia writes.

This initiative, being spearheaded by the Automotive Software Platform and Architecture (ASRA) consortium, aims to solidify Japan’s automotive leadership and enhance its competitiveness against Chinese rivals like BYD, which have gained market share in key regions thanks to their line-ups of cheaper, more electrified offerings.

Key chip and component suppliers, such as Denso and Renesas Electronics, are also on board. By standardising automotive chips, these companies hope to gain stronger bargaining power and higher production volumes with leading contract chipmakers like TSMC, which may otherwise prioritise more lucrative AI chip orders over those for automotive applications.

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#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London.

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