The incoming Trump administration promises to impose tariffs on many products shipped to the US from abroad in the president-elect's bold effort to see goods produced domestically. Doing so will add complexity and cost for electronics companies, especially Nvidia, that are dependent on products from dozens of far-flung suppliers and have been for decades.
The same is likely to apply to makers of cars and many other consumer goods that assemble final products in the US using components from abroad. Economists have broadly predicted price increases on consumer goods as manufacturers pass along the burden of tariffs.
Another supply chain wrinkle in the mix affects semiconductors and how and where they are packaged. Case in point: a new report from Reuters quotes three unnamed sources saying Nvidia and TSMC are in talks to produce Nvidia Blackwell AI chips at TSMC’s new plant in Arizona next year instead of at TSMC in Taiwan.
But the report also says Nvidia would still need to ship the unfinished Blackwells back to TSMC in Taiwan for packaging under TSMC’s CoWoS (chip on wafer on substrate) capacity which is necessary for Blackwell chips. All of TSMC’s CoWoS capabilities are in Taiwan.
The Trump administration will need to wrestle with the complexities of what is now a global supply chain for electronics. Nvidia could be putting its lawyers to work figuring out the tariff nuances affecting Blackwells. (Nvidia did not immediately respond to a request to comment.) The final price to Blackwell buyers is already high, with CEO Jensen Huang putting a single Blackwell GPU at $30,000 to $40,000 earlier this year. But a full Blackwell board used in a server in a data center would include multiple Blackwells, plus added components like memory and cooling.
It isn’t clear whether a 10% (or higher) tariff on the finished and packaged Blackwells from TSMC in Taiwan would deter major companies working in AI. Many are willing to pay for the best AI accelerators and Blackwells are already popular with the biggest cloud providers. Elon Musk was early on board in wanting to buy 300,000 Blackwell GPUs for use in xAI—a total of $9 billion at $30,000 apiece.
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Reports in recent days also indicate Musk has secured a $1.08 billion deal to ensure xAI is first in line for Blackwell GPUs.
The company has already built the Colossus supercomputer with 100,000 Nvidia H200 previous-generation GPUs and Musk has said he wants to double its capacity.
Ultimately, the CoWoS problem might not be much of a problem at all. TSMC has an established packaging partnership with Amkor in the US to support chips for Apple, notes Gartner VP and analyst Gaurav Gupta. “If TSMC makes Blackwell chips too in the US in the future, I am sure they will figure out a more efficient way for test and packaging, rather than sending back to Taiwan,” he told Fierce Electronics.
Even so, Gupta said he recognizes the tariff threat remains a concern. “As different [electronics] parts are made across the world, these tariffs could be a big challenge,” he said.
The domestic test and packaging industry has pushed the Biden administration for more grants and support under the US CHIPS Act and other funding sources to lessen dependence on Asia providers. On Thursday, Commerce Department officials announced two final awards for Absolics and Entegris to support development of advanced packaging technology and onshore materials.
Absolics, an affiliate of Korea-based SKC, won up to $75 million for a new facility in Covington, Georgia, to support development of glass substrates for advanced packaging. Entegris won up to $77 million to support a manufacturing center in Colorado Springs, Colorado, to initially support production of liquid filtration products and specialized FOUPs containers to secure wafers as they are handled and transported.
TSMC won $6.6 billion in final grants from Commerce under the CHIPS Act last month to be used for three manufacturing facilities in Arizona. The first is expected to start production in the first half of 2025, while the others will start in 2028.