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How the U.S. and Global Semiconductor Industry Might Change During Trump’s Second Term

How the U.S. and Global Semiconductor Industry Might Change During Trump’s Second Term

An image of Congress during the day

With the end of the 2024 United States presidential election and the return of President-elect Donald Trump, a cloud of uncertainty has formed over the semiconductor industry. Market analysts and industry professionals seem divided on whether the semiconductor sector will flourish or face mounting challenges during his second tenure in office. The most significant contributor to this mounting unpredictability is primarily due to President-elect Trump’s attitude regarding tariffs.  

Trump’s previous tenure as U.S. President heralded the beginning of the U.S.-China trade war, which began in earnest in 2018. The Trump Administration started setting tariffs and other trade barriers on China, aiming to "make changes to longstanding unfair trade practices and intellectual property (IP) theft.”

Consequently, Beijing countered with restrictions of its own and accused the Trump Administration of “nationalist protectionism.” By the end of Trump’s first term, the trade war was considered a failure. However, during President Biden’s tenure, the U.S. placed further restrictions on exports to China, with a prominent focus on advanced semiconductors and semiconductor manufacturing equipment. These trade restrictions also grew in magnitude with the explosive rise of artificial intelligence (AI).

With a second Trump tenure approaching, the semiconductor industry is divided on how the market will evolve. Many are concerned about new challenges, as Trump has criticized the U.S. CHIPS and Science Act and promised a new round of tariffs that could go into effect the day he takes office.  

However, while uncertainty clouds the next four years, it is crucial to consider the likelihood of specific actions being taken.

Tariffs and the CHIPS Act: Campaign Promises and Their Feasibility

Going into the second Trump presidency, one of the biggest concerns is the CHIPS Act's future and coming tariffs. President-elect Trump is known for his “America First” trade policies, prioritizing economic self-sufficiency and U.S. industry protection via tariffs. During his campaign and after winning the U.S. presidential election, President-elect Trump has made several comments that have contributed to speculation on what the next 4 years will look like for the semiconductor supply chain.  

During his campaign, Trump stated he would place a “10% to 20% tax on all imported products and a 60% tax on Chinese goods. " More recently, President-elect Trump announced “he would use an executive order to levy a 25% tariff on goods from Canada and Mexico.”

These proposed tariffs could impact prices on various items, from iPhones to groceries. This would be especially rough on U.S. companies since the U.S. imports most of their chips from foreign sources after U.S. chip production fell from 37% in the 1990s to 10% today.  

According to a 2023 US International Trade Commission working paper, 44% of U.S. imports of logic chips–central processing units (CPUs), graphics processing units (GPUs), etc.--came from Taiwan as of 2021. The working paper estimated that “in the event of a major manufacturing disruption, the price of logic chips would jump as much as 59%, and the U.S. capacity would only be able to fill a portion of the gap left by the lack of Taiwanese imports.”  

Concerns about incoming tariffs levied against Taiwan, which could significantly impact the U.S. electronics industry, have mounted after Trump falsely suggested “that Taiwan stole its chips from businesses from the U.S. and believed that he can use tariffs to bring manufacturing back.”  

Likewise, comments by Trump and Republican leaders have sparked worries among industry professionals and chipmakers regarding the CHIPS and Science Act. On a Joe Rogan podcast, Trump called the CHIPS Act a “very bad deal” and insisted that his planned tariffs would achieve the same outcome of drawing chipmakers back to the United States.  

“We put up billions of dollars for rich companies to come in and borrow the money and build chip companies here, and they’re not going to give us the good companies anyway,” he said, arguing instead that his proposal to increase tariffs would attract chip companies for free.  

House Speaker Mike Johnson told reporters that Republicans "probably will" try to repeal the CHIPS Act, though he's since tried to retract that comment.

These comments have caused some chipmakers to rush to form binding contracts to ensure their CHIPS funding is safe when Trump takes office should the Act be repealed or modified. Several companies, including TSMC and Intel, have secured their financing, while others who have yet to do so, such as GlobalFoundries, believe their funding won’t be at risk.  

Industry Experts: Their Concerns and Worries

Going into a second Trump presidency, concerns have mostly been centered around the fate of the CHIPS Act and the effect tariffs would have on the U.S. and global semiconductor industry.  

President of Semiconductor Advisors, Robert Maire, has been critical of Trump’s use of tariffs in his trade policies. In a statement to MarketWatch, Maire said his guess “is that some early effects will be negative…the incoming administration loves tariffs and thinks they are all the trade imbalances…They use tariffs to enforce and cajole policies.”

Harry Broadman, a Principal at WestExec Advisors, Senior Economist at the Rand Corp., and former U.S. Assistant Trade Representative in the George H.W. Bush administration, echoed Maire’s statements.  

“Trump’s plans will make us worse off economically. In the short run, the consumer or individual will pay higher prices for imports, meaning the cost of what they buy has risen significantly. That means you are going to have inflation. People will find their disposable income decreased.”  

In an opinion piece by MarketWatch, the article stated that while there is uncertainty around the tariffs and what they might target, it was believed that the technology sectors would suffer the most significant impact should Trump’s tariffs come to pass.  

In another report by Yahoo Finance, experts were concerned that instead of tariffs prompting companies to move to the U.S. to avoid higher costs, companies could forgo spending cash on expensive facilities and pass the tariffs on to the customer. This move could cut the profit margins for several U.S. companies, such as Nvidia and AMD, as both use Taiwain chip manufacturers to produce the components they design. This would have wide-ranging effects on the entire tech industry.  

“If the argument is that this is the way to force it to move here, TSMC is already moving here,” explained William Reinsch, a Senior Adviser with the Center for Strategic and International Studies. “They're already building a fab plant in Arizona. That's all already underway, and the tariffs aren't going to make that move any faster. If anything, they might complicate the effort.”

President-elect Trump has been highly outspoken regarding Taiwan’s role in the semiconductor supply chain. Some believe that if Trump aims to cut TSMC’s role through tariffs, it would significantly damage U.S. tech ambitions in the long run. Taiwan’s TSMC is one of the primary producers of semiconductors globally, producing 60% of the world’s chip supply and 90% of all advanced semiconductors. Nvidia has stated that it simply wouldn’t exist today without the help of TSMC.  

Tengku Zafrul Aziz, Trade Minister of Malaysia, has stated that Trump’s tariffs could have wide-reaching impacts on the global semiconductor supply chain. Reuters reported that according to Aziz Malaysia was monitoring the situation after Trump made comments that BRICS members, major emerging economies initially including Brazil, Russia, India, and China, would face 100% tariffs unless “they committed to not creating a new currency or supporting another currency that would replace the United States dollar.”

Tengku Zafrul noted the “United States was Malaysia's third-biggest trade partner and U.S. firms were the main investors in its semiconductor sector.” Malaysia is a major hub within the global semiconductor supply chain, accounting for about 13% of global chip testing and packaging. Malaysia has also applied to be a part of the bloc.

"As such, any move to impose a 100% tariff will only harm both parties which are depending on each other for efforts to prevent disruptions in the global supply chain," he said in a parliamentary reply.

However, despite their worries about the possible added costs of these proposed tariffs, many industry professionals see some positives.  

Industry Experts: Opportunities That May Arise

While concerns over increased pricing and growing tensions between the U.S. and China have kept many on their toes, other experts believe these policies could benefit U.S. domestic semiconductor ambitions.

Business Insider told Yahoo Finance that “tariffs on foreign-made chips could help level the playing field for US chipmakers, which are facing fierce competition from their counterparts abroad. The tariffs could also encourage US businesses to source more chips domestically and help persuade chipmaking giants, like the Taiwan-based TSMC, to keep building factories in the US. These developments could aid job growth in the US semiconductor industry, though experts disagreed on how much.”

Tariffs might encourage foreign entities to establish plants within the U.S. to avoid costly tariffs, boosting U.S. manufacturing numbers and creating more job openings for locals. Jeff Ferry, Chief Economist at the Coalition for a Prosperous America, estimated that tariffs could “create roughly 100,000 jobs at US chip manufacturers and their suppliers.”

Some industry analysts believe tariffs would only be a minimal cost for tech companies and electronic goods, with some companies being exempt entirely. For example, Apple, which has some of its product parts manufactured in China, negotiated with Trump during his first term to avoid costly tariffs.

Similarly, Trump’s allies, such as Elon Musk, have business interests in China, which might deter a full scorched Earth trade policy.  

Stacy Rasgon, a Bernstein Research Analyst, said, “The direct impact of the additional China tariffs on semiconductors alone would be minimal. He said we hardly import any chips from China, adding that the Biden Administration has already increased tariffs on semiconductors from China for 2025. Raw semiconductors made up about $3 billion in imports, out of $427 billion in total goods imported from China in 2023.”

TSMC Chairman Mark Liu is reportedly unfazed by talks of extreme tariffs. Liu stated that the tariffs would minimally affect Taiwan, which primarily produces intermediate goods. Likewise, the relationship between the U.S. and Taiwan was symbiotic thanks to Taiwan’s manufacturing prowess and the U.S. design capabilities.  

Liu even plans to return to the U.S. once he retires to explore establishing a think tank for U.S. industrial policy to foster more rational and secure policymaking, which is necessary in today’s unstable geopolitical climate.  

Concurrently, despite President-elect Trump’s and House Speaker Johnson’s comments on the CHIPS Act, many believe that it will remain in place despite comments. The CHIPS Act received massive bipartisan support that contributed to its passing, and these ambitions set forth would likely remain a priority despite the administration change.  

On CNBC’s “Squawk Box Asia,” Adam Posen, President of the Peterson Institute of International Economics, said, “The Trump administration will probably try to reinterpret the bill so they can spread the money a little differently than Biden, but I don’t think they’re going to roll it back.”  

“I do think there’ll be more action on the tariffs expanding,” said Posen.

Patrick Moorhead, Founder, CEO, and Chief Analyst at the research and advisory firm Moor Insights and Strategy, told Business Insider that “tariffs could increase the number of US chip manufacturing jobs. He added that he thinks the policy could incentivize chipmakers like TSMC and Samsung, which is based in South Korea, to boost manufacturing in the US.”

"The cost of manufacturing in the US for Samsung and TSMC would be lower than a 30% to 40% tariff on wafers and packaging," Moorhead said.

Stephen Ezell, Vice President for global innovation policy at the Information Technology and Innovation Foundation, argues that much more goes into deciding where to build a facility than just tariffs. The effectiveness of tariffs might be limited because chips do not come directly into the U.S. as a single part but are embedded into finished products such as computers or smartphones.  

Chipmakers decide where to build based on wage rates, labor talent pool, and tax policies, not tariff policy alone.  

The Global Impact on the Semiconductor Supply Chain

The most significant impact that a second Trump presidency will have on the global supply chain will likely come from tariffs, leading to increased prices and ongoing tension between the U.S. and China. Over the last four years, during the Biden Administration, export restrictions have continued to fuel the trade war, which would have likely continued no matter who won the 2024 election.  

Trump’s “America First” policies will contribute to a reemergence in reshoring efforts, with tariffs being leveraged to promote shifting industrial policies. However, companies may simply pass the cost of the tariffs onto the consumer rather than building new facilities within the U.S. to circumvent tariffs, as semiconductor fabs, especially, are incredibly costly to construct.  

Those considered “trustworthy” partners might have a better chance of negotiating around the tariff policy, as Apple did during the first Trump administration. Countries that agree to play ball with U.S. restrictions, like Japan and the Netherlands, will likely be exempt from some harsher export rules, such as the foreign direct product rule (FDPR), which Trump will probably keep in place.  

President-elect Trump’s use of tariffs and trade barriers against allies, like Canada, might further complicate the global geopolitical situation should his proposed 10%- 25% plan come to pass.

Similarly, China has placed export controls on critical minerals in response to U.S. restrictions, so the U.S. may concentrate on increasing domestic production of raw minerals used in semiconductor fabrication. A more extensive source of essential minerals could reduce geopolitical risks and material shortages for the U.S. and the global supply chain.  

However, rapidly moving away from foreign suppliers like TSMC could contribute to significant supply chain disruptions. This would leave many chip companies and tech giants, such as Nvidia and Apple, scrambling to find alternative sources that don’t have the same capabilities yet. It’s hard to say what the global supply chain will look like two years into Trump’s second turn, but should the President-elect move forward with his tariff plan, it might mean higher costs across the supply chain that consumers might end up paying for.

The Results: Future Unclear, but Growth is Possible

Under President Trump's second term, the semiconductor industry is poised for significant changes. The combination of tariffs and heightened geopolitical tension could have a wide-reaching effect on the global supply chain, from chip manufacturers to end customers.  

Companies might find it increasingly difficult to navigate a more complex landscape of competing national interests and trade barriers, which can shift on a dime. However, industry experts argue that these policies could create new opportunities for domestic markets within the U.S.; the world will have to wait and see.

To help the semiconductor industry prepare for the changes and challenges of the next four years, Sourceability’s experts are ready to help organizations navigate complex supply chain disruptions that may arise. Component unavailability is rising and might worsen during the second Trump administration as geopolitical tensions grow.

No matter what happens, Sourceability’s digital tools, like the e-commerce platform Sourcengine, and its knowledgeable sourcing team are here to help.  

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