Microsoft might be getting U.S. tariff exemptions on chips supplied by TSMC — potentially dramatically lowering costs

Microsoft and other hyperscalers are set for a big windfall if this new report is true.

One of the biggest constraints facing Big Tech right now revolves almost entirely around U.S. economic policy. The Trump administration's often arbitrary application of tariffs on foreign goods has wrought havoc across various industries, pushing up prices for U.S. consumers while wiping out hundreds of thousands of jobs. Amazon alone is cutting 16,000 positions as of January, and Microsoft laid off over 10,000 throughout last year.

"Line must go up" mentality has forced firms to cut costs in and push up its prices to offset margin pressure from tariffs, which act as tax on imported goods into the United States. For Microsoft, that means higher costs on various consumer goods, including Windows PCs, Surface devices, and Xbox consoles. Even products exempted from the tariffs directly may see added costs by virtue of their supply chains also seeing added costs. Firms pass on losses to consumers in the form of higher prices. For Microsoft, consumer devices are only a small part of its problem.

The biggest pressure point for Microsoft and other hyperscalers like Amazon and Google revolves around cloud and AI-first data centers. Building out compute for artificial intelligence platforms is becoming so expensive that it has investors spooked. Microsoft and Amazon both have seen hundreds of billions in market capitalization wiped out over capital expenditure concerns.

A new report in Financial Times suggests that relief may be on the way.

Citing sources familiar with the matter, albeit unauthorized to speak officially, FT says that the U.S. administration is allowing TSMC to provide exemptions to specific companies from an updated tariff regime. The White House is trying to incentivize TSMC and other chip makers to invest in U.S. manufacturing instead, to which Taiwan-based TSMC has pledged $165 billion in future investments.

The tariff carve-outs would reportedly be tied to how Taiwan allocates investments in building out U.S.-based chip manufacturing operations, although the source says the plans are still in "flux."

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Microsoft is using TSMC to build its home-grown Maia 100, Maia 200 and Cobalt 100 AI data center chips, it also indirectly partners with TSMC for most of its other silicon needs. Microsoft and ASUS' Xbox Ally gaming handheld uses AMD's Z2 chipset, largely fabricated via TSMC. The next-gen Xbox SoC, codenamed Magnus by AMD, is also most likely being produced by TSMC. White House officials and TSMC both declined to comment.

While the report might be hopeful news for investors, it could also have positive impacts on consumers down the line. The TSMC-dependant Xbox Series X|S saw price increases last year as a direct result of U.S. tariff impacts. The move might signal at least partial acknowledgement of the negative impact on pricing — as mid-term elections loom.

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