Taiwan Semi Warns: Trade War Would Hurt Apple

Taiwan Semiconductor (TSM), one of Apple Inc.’s (AAPL) largest iPhone component suppliers, expressed concern about the impact a trade war between the U.S. and China would have on the business.

During an interview with The Australian Financial Review, Morris Chang, founder and exiting chair of Taiwan Semiconductor, said the potential for a trade war is a new challenge for the company and something he hasn’t faced in the past but that his successors will have to contend with. “What they can do? I don't know," said Chang.

Taiwan Semiconductor makes the core processor chips for the iPhone. And while it is mainly manufactured in a factory in Taiwan, Chang is concerned that it will get expensive for the global mobile handset supply chain if President Donald Trump imposes tariffs on Chinese products and China reacts in kind. "China does a lot of assembling of the final product, so the U.S.-China trade dispute may impact us also," the executive said. The report noted that close to half of Taiwan Semiconductor Manufacturing’s $33 billion in annual revenue is from smartphones. (See also: How TSMC Makes Money.)

Trump Tariffs Worry Tech Companies

Earlier this year, Trump proposed tariffs on imported aluminum and steel and said the White House was identifying billions of dollars in tariffs it could slap on China. That has prompted worries about a global trade war and the impact it would have on China as well as U.S. tech companies. Both countries held two-day talks last week, with CNN reporting that China said progress was made with the U.S. on trade but that the two sides are still far apart on certain issues. The two countries ended the two days of talks agreeing to keep communications open. To narrow the trade gap between the U.S. and China, the U.S. is looking to cut the trade imbalance by $200 billion, reported The Wall Street Journal. The U.S. also sought during the trade talks for China to reduce tariffs on imported American products and a promise from the Chinese government that it won't retaliate with additional tariffs. (See also: TD Ameritrade: Trade Issues Haven't Gone Away.)

If the U.S. slaps new tariffs on electronic products coming from China, it will increase the cost of shipping parts to the U.S., which could impact the supply chain and put Apple suppliers with big production facilities outside of China at the biggest risk, Sam Kao, of Yuanta Securities said in the report. Still, many analysts think Apple will come out unscathed given its ability in the past to shift manufacturing to meet its needs.